2017 Integrated Annual Report Coca‑Cola Hellenic Bottling Company 2017 Integrated Annual Report UNDERSTAND EVOLVE ENERGISE Contents Strategic Report Financial Statements 1 Understand, evolve, energise 128 Independent Auditor’s Report 8 Our business 133 Financial Statements 10 Joint Q&A with the Chairman 139 Notes to the Financial Statements and Chief Executive Officer 16 Market review Swiss Statutory Reporting 18 Our business model 198 Report of the statutory auditor on 21 Our strategy and KPIs Coca‑Cola HBC AG’s consolidated 28 People financial statements 34 Communities 204 Report of the statutory auditor 38 Consumers on Coca‑Cola HBC AG’s financial 44 Customers statements 48 Efficiencies 207 Coca‑Cola HBC AG’s financial 55 Risk and materiality statements 64 Financial review 218 Report of the statutory auditor on 68 Market highlights the Statutory Remuneration Report 70 Viability Statement 219 Statutory Remuneration Report

Corporate Governance Supplementary Information 72​ Board of Directors 223 Alternative performance measures 76 Corporate Governance Report 227 Assurance statement 104 Directors’ Remuneration Report 230 Shareholder information 126​ Statement of Directors’ Responsibilities Glossary

Key highlights for the year We announced our financial results for the year ended 31 December 2017 on 14 February 2018. In addition to the reported and comparable metrics we highlight below from these financial results, we report on our progress towards our 2020 target KPIs on pages 24-25.

VOLUME NET SALES REVENUE (m unit cases) (€m) 2,104 6,522 2016: 2,058 2016: 6,219

COMPARABLE COMPARABLE EBIT MARGIN1 (%) NET PROFIT1 (€m) 9.5 450 2016: 8.3 2016: 352

COMPARABLE EBIT1 NET PROFIT (€m) (€m) 621 426 2016: 518 2016: 344

1. For details on APMs refer to the Alternative performance measures section. About our report The 2017 Integrated Annual Report (‘Annual Report’) consolidates Coca‑Cola HBC AG’s UK and Swiss disclosure requirements while meeting the disclosure requirements for its secondary listing on the Athens Exchange and the sustainability reporting standards. For more information about our Integrated Annual Report, see page 234. 2017 has been a busy and exciting year for Coca‑Cola HBC. Changing market environments and evolving consumer preferences compel us to better UNDERSTAND our consumers' needs and to EVOLVE and reformulate our portfolio. We are ENERGISED by our position now, and our excellent progress against our strategy leaves us in a confident position for the year ahead. Coca-Cola Zero Lemon launch in Italy and the Czech Republic helped grow Coke Zero volumes in these countries by more than 20% in 2017. UNDERSTAND 22 21 RTD coffee RTD day anbased aueadded day 20 1 The fastest growing retail sectors are all The fastest growing retail a convenient and driven by the need for trip, whether cost-effective shopping and home this is online shopping delivery or the emergence of smaller stores or discounters. We work hard in our markets to support the established formats capture the changing shopper and also take advantage of the opportunity in the faster growing formats. In turn, we are mindful of the impact that latest consumer trends have on packaging decisions and we continue our strategy to use more recycled packaging and less packaging overall. 1 ea dns ney dns 17 16 1 the preferences of our the preferences 14 dynamics of our customers. dynamics We work hard to understand to understand hard We work consumers and the changing and the changing consumers an beeaes ae ue See more on market trends in the Market review section See more on market trends in the Market review Company and TCCC estimates for 2018-2022 Expected market value in 2022 NARTD beverages value by category in our footprint NARTD beverages value by category (€ billion, 2014-2022) 97.5 Consumer preferences are changing Consumer preferences with an faster than ever before, people looking for increasing number of or simply healthier, more functional unique beverages to suit their lifestyles. We work hand-in-hand with The Coca-Cola Company to understand the consumer insights that shape the non-alcoholic ready-to-drink (NARTD) beverages industry and are excited about the opportunities these trends offer our business. The retail landscape is also in constant evolution, driven by the needs of shoppers, with established formats being challenged. 0 20 40 60 0 100 A very successful innovation launched in Russia in 2017, Sprite Cucumber will be rolled out in several other countries. EVOLVE Flavours of other sparkling brands 15% Variants of Coca-Cola 28% Our route-to-market (RTM) initiatives deliver Our route-to-market continuously changing tailored solutions to the that we capture the retail landscape, ensuring in every market and every growth opportunities channel. The consistent growth of smaller households is boosting the search for convenience, while discounters are the most dynamic segment. We are gaining incremental revenue by accelerating our ‘small baskets’ initiatives and single-serve packages. Digital commerce is also redefining the grocery shopping experience, presenting us with opportunities in increased transactions and closer engagement with the consumer. New categories and brands 5% Flavours for adults 4% 5% Calories reduced in total portfolio vs 2016 2.3% volume growth vs 2016. We sold 47 million cases of innovative products and packages, accounting for New package formats 46% Other flavours 2% reformulating our products. reformulating creating new beverages and new beverages and creating To meet changing consumer consumer changing To meet preferences, we evolve our portfolio, we evolve our preferences, See more on our initiatives in the Consumers and Customers sections See more on our initiatives in the Consumers Growth achieved from new launches in 2017 Growth achieved from new launches Jointly with our partners The Coca-Cola Jointly with our partners new beverages, flavours Company, we develop the changing needs and packages to meet also evolve our recipes, of our consumers. We providing more options to consumers with fewer calories, while keeping the great taste that consumers love. Key developments in 2017 have been Coca-Cola Zero Lemon, Coca-Cola with stevia and no calories, Sprite Cucumber, Schweppes Pomegranate, Monster Hydro and Vegified juice. Schweppes Pomegranate is one of our adult drink offerings. Launched in Russia in 2017, this variant was instrumental in growing Schweppes volumes by 15% in the year. ENERGISE % 6% 4% 2% 0% 12% 10% 17 16 a aen eenses aen a scale) (RH as % of revenue 1 In markets where we can generate higher value In markets where we can volumes, we intend by increasing single‑serve in coolers. to continue our investment in the promising It is crucial that we invest we are launching, new categories and brands and in-store in the form of both advertising execution. We have strong plans for investment in this area and our investment is matched by our partner, The Coca‑Cola Company. 14 1 CapEx as % of revenue scale) (RH 12 11 term growth. for long- We energise our business our business We energise neua eenue eenue neua % sae h by investing in it and nurturing it in it and nurturing by investing Investing in revenue growth 5.9% FX-neutral revenue growth in 2017 6% % 4% % 2% 1% 0% 1% We have a cash-generative business and a We have a cash-generative to deploy the cash to tremendous opportunity and value growth take advantage of volume we are investing in opportunities. In production, categories such as new technologies for and innovative plant-based beverages packaging. Cooler technology is also advancing, our with digital coolers that can ‘connect’ with consumers as well as more energy-efficient will and environmentally friendly coolers, which further drive down carbon emissions. OUR BUSINESS

We have built the foundation for future growth and long-term SUCCESS

We have unique strengths to support We have a diverse portfolio of some our future journey of the world’s leading brands We are primed for growth. The fundamentals supporting our We have substantially developed our product portfolio over the long-term growth potential include the opportunities and years, expanding the share of still drinks in our volumes to 31%. demographics in our countries, our diverse and attractive product This is quite unique in the Coca-Cola System and gives us an edge, portfolio, and our strong position in the vast majority of our as many still drinks categories, such as water and plant-based markets. These fundamentals are supported by our relentless beverages, are forecast to grow faster than the industry as a whole. focus on maximising the value of every case we sell and the lean Our experience with product innovation and new product launches, infrastructure we have built through significant restructuring. coupled with the evolution of our beverage portfolio pursued Our strategy and ambitions are clear, and we measure and with The Coca-Cola Company to address changing consumer manage our ongoing progress using financial and non-financial preferences, powers our plans for more innovation, reformulation targets set for 2020. and selective acquisitions in still drinks.

See more in the Strategy and KPIs sections See more in the Consumers section

We seek efficiency in everything we do The optimisation of our production and logistics infrastructure and the right-sizing of operating costs give us an efficient cost base with sufficient capacity headroom to continue to grow our revenues. Importantly, efficiency is a discipline that runs through everything we do at Coca-Cola HBC. We continue to look for ways to reduce the cost of our inputs and the resources we use, and to minimise our impact on the environment. du -31% -290bps by ue sd reduction in number fall in comparable operating expenses of plants since 2008 as % of net sales revenue since 2008

See more in the Efficiencies section

an beeaes 2 ue ae 19 ea 4 and nae san dns 7 ney and he 2

8 Coca-Cola HBC 2017 Integrated Annual Report We can develop and fuel growth Strategic Report in our markets During the period from 2009 to 2015, our business faced unprecedented challenges from macroeconomic turmoil. This situation served to demonstrate our strength and resilience and the commitment and dedication of our people. In the last couple of years, we have seen the macroeconomic environment in our markets gradually improve and this is driving growth in the non-alcoholic ready-to-drink (NARTD) beverages industry. Our forecasts indicate that NARTD beverages should grow by 1.5%

per annum on average in our markets between 2016 and 2020. Corporate Governance We continue to invest in our markets to grow volumes ahead of the industry and extract value out of our business under these more favourable conditions. Emerging Developing Established markets markets markets GDP per capita GDP per capita GDP per capita US$5,502 US$15,117 US$37,854 Consumption Consumption Consumption 97 servings 208 servings 187 servings

Revenue in 2017 Revenue in 2017 Revenue in 2017 Financial Statements +7.2% +7.2% +1.2%

Consumption is measured as 8 oz. servings per capita of sparkling drinks

See more in the Market highlights section

We remain agile in the changing retail We lead the way in sustainability landscape and execute with excellence in the beverage industry As the market leader in every market where we operate except for The recognition we have received globally as the sustainability Swiss Statutory Reporting Slovakia, we work closely with our customers to develop and satisfy leader amongst beverage companies in the Dow Jones World and consumer demand, growing their business as well as ours. There Europe Sustainability Indices (‘DJSI’), and as the leader of the wider are also efficiencies we can gain when taking our products to food, tobacco and beverage sector, reflects our success in market. In a very dynamic retail landscape, we focus operating an efficient, profitable business that is also responsible on route‑to‑market initiatives that deliver tailored solutions for the and trusted by stakeholders. This trust allows us to be even more continuously changing retail landscape, ensuring that we capture ambitious in creating shared value, and serves to position our growth opportunities in every market. business as fit for purpose in a changing world.

See more in the Customers section Our priorities are driven by the material issues which have the potential to alter our business environment in the medium to long term, including health and nutrition, and packaging. We also seek to address existing needs as well as new opportunities in our Supplementary Information markets to strengthen communities and maximise our impact by carefully measuring the value we add and partnering with others to leverage combined expertise. -9.1% 4 years reduction in direct carbon consecutive leadership in our industry emissions ratio ​ in the Dow Jones World and Europe Sustainability Indices

See more in the Communities and Efficiencies sections

Coca-Cola HBC 2017 Integrated Annual Report 9 JOINT Q&A WITH THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

10 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance Financial Statements IN A STRONG POSITION TO ACHIEVE FUTURE GROWTH OPPORTUNITIES In 2017, we steered our We are building on the strong foundation I feel privileged to have worked with Dimitris

that we established with Dimitris Lois, who Lois, a special person and an inspiration to Swiss Statutory Reporting organisation through led Coca-Cola HBC as CEO from 2011 until the whole Coca-Cola HBC family. He had another year of success his untimely death in October. remarkable values, and placed our people at the centre of everything we do. and growth. We continue to successfully implement our strategic plans, evolving our Company This is reflected in the Company’s 2017 by diversifying our portfolio of beverages employee engagement results, which set and modifying our offerings to be the bar for the Coca-Cola System and even more relevant to consumers ranked Coca-Cola HBC above the Willis and customers. Towers Watson benchmarking pool of high‑performing companies. This is an Q: How was 2017 for achievement that forms the foundation for much of the Company’s success. Coca-Cola HBC? Supplementary Information AD: Our impressive results for the year are I was delighted to announce Zoran’s very pleasing and a clear demonstration of appointment as Chief Executive Officer our long-term efforts to establish a strong in December. He will bring a deep strategic framework. The implementation understanding of our markets and of our internal succession plan, and the corporate culture along with fresh, Anastassis G. David reinforcement of corporate governance innovative insights to address Chairman and sustainability commitments, are also new challenges. a testament to the effectiveness Zoran Bogdanovic of the Board. Chief Executive Officer

Coca-Cola HBC 2017 Integrated Annual Report 11 JOINT Q&A WITH THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER CONTINUED

ZB: Needless to say, we are proud that, Each market in the Company had a set of We also continued to convert our profits once again, we achieved solid currency- clear ‘revenue growth management’ to cash, delivering €426 million of free neutral revenue growth as well as initiatives, ranging from identifying new cash flow. improvement in operating margin. We revenue pools and improving mix to started the year excited about the adjusting pricing and promotional Q: Can you elaborate on the 2017 recovering economies in our markets and management. These initiatives have been Integrated Annual Report theme: the well-thought-through plans every very successful in supporting revenue Understand, Evolve, Energise? person was charged with implementing. As growth. Our commitment to continuous the year progressed, the operational and efficiency improvements remains ZB: Consumers’ lifestyles are changing, financial results we delivered invigorated unchanged, as does our steady focus on with growth coming from lower calorie and everyone in the Company. As Region attracting, developing and retaining the more unique product propositions, some of Director for part of the business before my best people. Finally, we are proud to have which offer additional functions in addition appointment as CEO, I have been witness been named the food, tobacco and to satisfying thirst. Demographics in many to the day-to-day motivation and energy beverage supersector leader this year in of our markets are also changing, throughout the business. Improvements in addition to remaining beverages industry with populations in many European markets the macroeconomic environment in Russia leader in the Dow Jones Sustainability ageing and more people living alone. As and our success in managing the Indices for the fourth year in a row. This is lifestyles change, shopping habits are also challenging circumstances in Nigeria were an important indication of our commitment changing, making the adult segment and key developments in 2017, and provide to our stakeholders and communities as ‘small baskets’ increasingly important. good momentum for 2018. well as our success in managing critical Understanding these trends is important to material issues. ensure that we evolve our business, our Q: How would you summarise the Our strong results for the year have us on product portfolio and market execution in operational and financial highlights track to achieve the 2020 financial targets ways that meet changing consumer and for the year? we announced in 2016. We delivered 5.9% customer needs and preferences. As consumers are spending more time at ZB: We have been making significant revenue growth on a currency-neutral work, or at home having ‘me time’, we are changes to drive volume and enhance value basis. Importantly, this was achieved with a evolving our approach to cater to these in an ever-changing environment, with good balance between volume growth and occasions alongside the more traditional consumers looking for more choice to suit price and mix improvements. As occasions such as ’Coke with meals’. Digital their preferences and customers making anticipated, the operational leverage in the technology is also impacting consumption changes to ensure the long-term health of business meant that this revenue growth patterns and shopping habits, opening up their businesses. resulted in a 120 basis-point expansion in our comparable operating margin to 9.5%. new sales channels.

“Consumers’ lifestyles are changing, with growth coming from lower calorie and more unique product propositions, some of which offer additional functions in addition to satisfying thirst.” Zoran Bogdanovic

12 Coca-Cola HBC 2017 Integrated Annual Report More information See more about strategy and KPIs page 21 See more about our market page 16 See more about consumers and customers page 38

Having applied revenue growth Strategic Report management principles in our business for a few years, we have gained greater impetus. The understanding and discipline we now have, coupled with the tools we have developed, will support volume and value growth in a sustainable way. With the total beverage portfolio evolution that we are pursuing with The Coca-Cola Company, we are collaborating in realising an unprecedented level of innovation,

leading to new categories, brands, Corporate Governance packages and channels. We are in touch with consumers 24/7, for every occasion. Our route-to-market and execution capabilities have recently been upgraded, helping to make sure we can support our “We have been making significant changes to drive existing customers in the established volume and enhance value in an ever-changing channels as well as taking advantage of opportunities presented by newly environment.” emerging channels. Gaining efficiencies in production, logistics Zoran Bogdanovic Financial Statements and operating cost base are a way of life at Coca-Cola HBC, and our continued focus In this report you will read about our plans We believe that the innovative flavour on efficiency is key to streamlining for innovation, reformulation, new and herb combinations of FUZE tea and packaging, reducing energy use and packaging formats, changes to our route to the marketing investment to support the minimising our impact. Finally, we are market, digital coolers and e-commerce, all brand will revitalise the ready-to-drink determined to continue to invest in the of which contribute to this evolution, tea category. business for growth. energising our business for growth and We are very excited about new categories, These are, I believe, the key factors for the success in the long term. too. AdeZ plant-based beverages are fulfilment of our vision. AD: Our consumers are key stakeholders, coming in 13 markets. Coffee, which is and understanding their needs is crucial. critical to our efforts to grow the ‘at work’ Q: Two years into the 2020 plan Swiss Statutory Reporting We are also mindful that all of the other occasion, has already been launched in and you have delivered very well. stakeholders we engage with, from several markets. Finally, we are running a Are your plans and financial investors and customers to employees and new initiative called Incubate & Grow, which targets still valid until 2020? suppliers, are keen to understand how our will pilot certain products such as business is evolving to remain fit for Appletiser, glacéau smartwater and ZICO AD: When the Company first announced its purpose and energised to grow in a Coconut Water in affluent cities in our 2020 financial targets in 2016, the targets changing world. territory. In my 21 years at Coca-Cola HBC, were seen as ambitious by the investment I have never witnessed as many launches as community. We indicated that our progress would be slow through 2017, picking up Q: What innovations are being we will have in 2018. significantly as the macroeconomic prioritised for the year ahead? environment improved. ZB: Firstly, in order to shape choice and Q: How is the Company tracking That we are well on track to achieve our Supplementary Information proactively support low- and no-calorie against its strategy? 2020 plan goals is very pleasing and shows sparkling drinks consumption, we are ZB: The financial results speak for that our confidence in our business and our working with The Coca-Cola Company to themselves. What is important for me is people was justified. I am just as pleased evolve the recipes. Sparkling drinks account how well entrenched our strategy is in the that the Company is on course to achieve for two thirds of our portfolio and we will hearts and minds of our people. After all, the vast majority of its ambitious continue to accelerate their growth. We are our people and our culture are the most sustainability targets. also refreshing the juice portfolio with critical differentiating factors of our smoothies and seasonal flavours. In Company as well as being the drivers ready-to-drink tea, we are launching FUZE of growth. tea, which will replace Nestea in all but three of our markets.

Coca-Cola HBC 2017 Integrated Annual Report 13 JOINT Q&A WITH THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER CONTINUED

This investment is lower than our commitment to spend 2% of our pre-tax profit on communities due to the fact that our programmes take longer to ramp up while the increase in profitability is nearly 60% in two years. I am particularly happy with our achievement of a 9% reduction in carbon emissions from operations in 2017, compared to 2016 levels. Moreover, we reduced the amount of water we use and energy we consume to produce a litre of beverage by 6% and 4% respectively. These actions demonstrate our commitment to grow our business profitably, whilst lowering our impact on the environment. We also introduced a new commitment in 2017. As part of an overall industry pledge, we will by 2020 reduce the amount of added sugars in our sparkling soft drinks across the EU and Switzerland by 10% against the “That we are well on track to achieve our 2020 2015 baseline. We have already made a good start in 2017, and ongoing work to plan goals is very pleasing and shows that our reformulate recipes supports this objective confidence in our business and our people – and global health and wellness – while was justified.” helping us meet consumer needs. We will keep our commitments relevant and Anastassis David maintain our focus on our key material issues; in 2018, we will review our sustainability commitments with a view ZB: Our strategy is clear and Let me summarise our progress. We are beyond 2020. implementation has been successful partly behind on our commitment to AD: 2017 has been a pivotal year for our because our people really understand their increase the use of recycled PET and sustainability agenda. Along with the role in making it happen. The success we plant-based PET materials for our PET improvements that Zoran mentions, we are achieving validates the strategy, and we packaging due to the higher cost of these have successfully rolled out our flagship believe we are gaining speed. Barring materials in our geographies. On the other community programme, #Youth unforeseen circumstances, we are hand, we are pleased that in 2017 we have Empowered, in 21 of our markets. We know committed to our plans and reiterate our already met our 2020 packaging recovery that the future of our business is linked to financial targets for 2020. target, collecting for recycling the futures of young people across our approximately 41% of the total packaging markets. #YouthEmpowered seeks to we put in the marketplace. Encouraged by Q: As a signatory to the United address persistent underemployment for this strong performance, we are working on Nations’ (UN) Global Compact young people between 18 and 30 years old. revising the recovery rate target. since 2005, and a supporter of the During 2017, more than 21,500 youngsters UN’s Sustainable Development We have also joined the World Without participated in a combination of on-site Goals (SDGs), the business has a Waste global packaging commitment of workshops and online training sessions. In very strong sustainability focus. The Coca-Cola Company, developing plans December, I attended a town hall session for drastic packaging reduction and with youth participants in Athens, along with Can you explain how this increased recovery beyond 2020. our Operating Committee, and all of the strengthens your business? country General Managers, and saw for In 2017, we invested €7.4 million in our ZB: During 2017, we continued to make myself how meaningful it is to contribute to communities, which is 2% higher than substantial progress against our ambitious the futures of people in this age group. 2016 and is equivalent to 1.3% of our sustainability targets. These targets, set for pre-tax profit. 2020, range from science-based goals for carbon reduction to increasing the recycled content used in product packaging.

14 Coca-Cola HBC 2017 Integrated Annual Report Our sustainability efforts are also Q: What are the Board’s areas Strategic Report recognised internationally. In 2017, of focus as we go into 2018? Coca-Cola HBC was named the industry AD: The Board will focus on supporting the leader amongst beverage companies in the evolution of the business, the acceleration Dow Jones World and Europe Sustainability of product innovation in alignment with Indices (‘DJSI’) for the fourth consecutive The Coca-Cola Company and nurturing year. In addition, we became the leader in our culture and values, all of which are the wider food, tobacco and beverage critical for the long-term growth and sector for the first time ever. We are success of Coca-Cola HBC. committed to remaining a force for positive change in our communities. We will also seek to continue demonstrating leadership in sustainability, working to Corporate Governance Q: With the change in leadership, continually improve and meet or exceed our should one expect a change in the commitments. To maintain resiliency and a culture of the business? strong pipeline of diverse talent, the Board will build on its succession planning work for AD: The Board believes that Coca-Cola Board and senior management positions. HBC has an incredibly strong corporate culture, and that this is a valuable asset Q: How do you see the outlook which requires attention and investment. The Company has very deep roots, for 2018? both within our markets and within the ZB: In 2018, we expect further economic Coca‑Cola System, and our culture is also growth and healthy inflation in Europe and deeply rooted. Russia. In Nigeria, high inflation impacted Financial Statements consumers in 2017, but economic However, as reflected in the theme of this conditions are forecast to improve in 2018. report, we are focused on the need for our business to evolve, and we expect that this Overall, we expect volume to continue will impact our culture. As our Company to grow in all three of our segments, evolves as a total beverage company, agility with the Emerging markets segment will become even more critical. Innovation accelerating, as Russia and Nigeria return has already become much more important. to volume growth. ZB: Our stakeholders, particularly We are excited about the year ahead, which employees, can expect our core values has a particularly strong pipeline of product to remain unchanged. Our values are the innovation and commercial activity around cornerstone of our culture and the work we our route to market and in-store execution. Swiss Statutory Reporting do to embed them will continue. There is good momentum in the business and a determination to build on our We have defined important behaviours that success. We are confident that 2018 represent the essential building blocks of will be another successful year. our culture; the behaviours we encourage. There are also behaviours, such as being curious, adopting innovative ideas with speed, taking risks and learning from both winning and failing, that will come to the fore with the evolution of the business. We have Anastassis G. David likewise identified behaviours that are not Chairman in alignment with our culture, including Supplementary Information accepting the status quo or failing to respond to customer needs. As our business evolves, we will adjust the set of behaviours to ensure it is always one that Zoran Bogdanovic supports our business the most. Chief Executive Officer

Coca-Cola HBC 2017 Integrated Annual Report 15 MARKET REVIEW

UNDERSTANDING EVOLVING TRENDS AND PREFERENCES

Dynamic retail environment Digital evolution Market trends The retail landscape keeps shifting as We see a consistently growing reliance on Success involves lifestyles and shopping habits change. digital communications which affects the Smaller and more frequent shopping trips way consumers connect with brands. The anticipating the future. and the increase of smaller households is total shopping experience is being driving growth in the proximity and digitalised, from market research for the We continually track convenience channel. E-commerce is also most appropriate product to online orders and monitor evolving seeing rapid growth. We expect these and home delivery. Social media is channels to be the highest incremental increasingly powerful for shaping category consumer preferences, revenue contributors in our industry by and brand perceptions. Mobile phones and shifting market conditions 2020. Socialising occasions such as ‘Away wearables allow constant connectivity, from home’ show signs of growth and providing opportunities for companies to and emerging trends. recovery in most of our markets, following disseminate information on promotional an upward trend in consumer sentiment. activities, new launches and brands. This places increased emphasis on sales through hotels, restaurants and cafes (HoReCa).

How we are responding Our focus on route to market enables us to Increased connectivity of consumers partner with our customers and ensure that creates new opportunities for sales, brand To win with customers we capture all growth opportunities across awareness and consumer feedback. Digital channels. We support the well-established solutions are being rolled out across our and delight consumers, organised trade and fragmented trade business to activate customers, empower we take proactive channels while simultaneously investing in our people and engage communities. We newer, faster growing ones. Whilst at a launched the WOAH (‘Where only awesome approaches, navigate small base, e-commerce has doubled in happens’) app to connect with teenagers in changing expectations value over the last five years. We prioritise eight countries. The WOAH app, launched strategic partnerships with online retailers, in partnership with The Coca-Cola and demonstrate driving transactions by working to ensure Company, interacts with connected business agility. our products are well represented on their coolers, sending our consumers push platforms. Consistent with our 24/7 notifications for customised promotions. It approach, we are devoting more resources also provides useful information to business to capture the socialising occasion growth developers and helps to minimise the time in HoReCa and to develop new channels in needed for administrative tasks. line with category expansion.

Delivered through Working with our customers Working with our customers Being relevant to our consumers Being relevant to our consumers Efficiencies +2.2% 0.55m Online purchase of groceries is forecast WOAH app downloaded 0.55m times to increase by 1 billion euros by 2020, in the first eight countries during 2017 accounting for 2.2% of the total future consumption channel value

16 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report

Regulatory environment Changing consumer preferences Sustainability The regulatory environment for the food Health and wellness is becoming a greater Consumers have become more conscious Corporate Governance and beverage industry is becoming priority, triggering a clear shift towards of the social and environmental impact increasingly prescriptive. Tax on products natural, organic and functional offerings of consumption decisions. Sustainability with added sugar, especially beverages, that contain less sugar, have pure considerations shape choice, especially is a reality in a number of countries and is ingredients and are sourced locally. among those who are less price-sensitive. a trend that is gaining strength. To guide The demand for more differentiation and As this preference is more pronounced consumers and address public health more choice provides an opportunity for among younger consumers, we expect this concerns, the World Health Organization the creation and growth of smaller brands. trend to accelerate. Companies that follow recommends that added sugars be limited The European population is ageing, leading sustainable practices are able to develop to 10% of daily calorie intake. Product to an increase in adult consumers looking greater brand loyalty and customer labelling regulations and packaging and for more sophisticated offers focusing on engagement, strengthening their environmental legislation are also higher on taste and premiumisation. competitive advantage. In addition, as regulators' agendas. natural resources become more scarce Financial Statements and environmental regulations stricter, companies that engage in sustainable practices benefit from financial incentives and reduced supply chain risk.

As a responsible category leader, we have We are greatly expanding our product In Coca-Cola HBC, sustainability is at the taken steps to drive sustainable, profitable portfolio with new brands and new core of all aspects of production, from growth for our brands, while enabling categories to satisfy a broader range of sustainable raw material sourcing and consumers to control their sugar intake. beverage needs. New, innovative products responsible use of water and energy to We are accelerating sales growth of low- include natural juices, premium water, environmentally friendly packaging and and no-calorie drinks, offering smaller plant-based beverages and adult sparkling waste management. It has also become Swiss Statutory Reporting packages and reformulating our sparkling soft drinks. To address concerns about part of the DNA of our business, impacting beverages to include fewer calories. We sugar intake, our innovation in sparkling all decisions and nearly everything we do. also support the Evolved Nutrition Labelling drinks focuses on low- and no-calorie Sustainability considerations are part of initiative along with The Coca-Cola options and on the development of smaller product development, procurement Company and four other industry players, packages. As new product launches decisions and our efforts to engage our for clear and uniform product information become key drivers of future growth, and employees. In 2017, we were named global across the European Union. We contribute to remain competitive, we are investing beverage industry leader in the Dow Jones to the fight against childhood obesity by not in enhancing our processes to manage Sustainability Indices (‘DJSI’) for the fourth advertising to children younger than 12 multiple launches simultaneously and to consecutive year and we were also and are taking steps to remove sugar- ensure that the speed to market is fast. recognised by the CDP (formerly the sweetened drinks from secondary schools. Carbon Disclosure Project), scoring an A for

Climate and Water. Supplementary Information

Being relevant to our consumers Working with our customers Being relevant to our consumers Winning the trust of our communities Being relevant to our consumers Winning the trust of our communities Efficiencies Efficiencies -5% +20% p.a. #1 In 2017, the implementation of our plans Plant-based beverages are expected We are number one in the DJSI and one of resulted in reducing the number of calories to grow by 20% p.a. between now and 2020 just 25 companies in all industries to score per 100ml in our sparkling portfolio by A in both climate and water in the CDP almost 5%

Coca-Cola HBC 2017 Integrated Annual Report 17 OUR BUSINESS MODEL

CREATING VALUE FOR ALL STAKEHOLDERS Our business model is at the heart of everything we do. It supports our growth and defines the activities we engage in, the relationships we depend on and the outputs and outcomes we aim to achieve in order to create value for all of our stakeholders in the short, medium and long term.

Our resources and relationships What we do How we do it

Human We are a bottling partner Sourcing sustainable of The Coca‑Cola Company. materials We work with 35,000 This means that we use the concentrates, or suppliers to procure syrups, from The Coca-Cola Company the finest ingredients, to manufacture, package, merchandise and raw materials, equipment distribute the final branded products to our and services. Natural trade partners and consumers.

The Coca-Cola Company creates demand Trademark ownership Concentrate supply Social and relationship Brand development Consumer marketing

Coca-Cola HBC delivers demand Bottling Financial Sales and distribution Customer management Serving consumers In-outlet execution and communities Investment in production We continue to innovate our facilities, equipment, product portfolio to meet vehicles the changing consumer preferences in the market. Intellectual

Leveraging our growth model

Brand investment In-store activation Marketing – The Coca‑Cola Company – Coca‑Cola HBC Manufactured In-market execution Growth in category volume Share gains

Investment in production Operating expense Cost efficiencies optimisation reduction

Working capital Disciplined CapEx See more on page 20 Use of cash management investment

See more on our growth model on page 20 18 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report

Value created

Manufacturing Direct and indirect economic impacts

and packaging Corporate Governance Operating in 28 countries, we are an important contributor Using concentrate from to local economies. Our business has an impact either The Coca-Cola Company, 28 directly through our core operating activities, or indirectly and other ingredients, countries in through the value we create in our communities. For more we produce, package Europe and Africa financial performance details see pages 64-67. and distribute products.

Our activities generate income for employees, provide revenue for suppliers and contractors, improve our €313m customers’ profitability, and support public well-being and paid in total Financial Statements infrastructure. In 2017, we met or exceeded our customers’ taxes expectations 94.2% of the time. We paid €313 million in total taxes, contributing to our communities.

According to a survey conducted within the European Union, the Coca-Cola System supports more than 500,000 direct 500,000 and indirect jobs across our value chain through the sourcing direct and indirect jobs of ingredients, raw materials, equipment and services. In supported 2017, our total supplier spend reached €2,687 million.

Delivering to our €2,687m Swiss Statutory Reporting customers supplier spend We manage customer relationships as well as promotions and displays We measure our impact through the regular conduct of at the point of sale. socio-economic impact studies (SEIS) across our markets. In 7 2017, we published SEIS in seven of our countries and we number of countries expect to conduct them in six more by the end of 2018. where we conducted SEIS

In-store activation Create – Coca‑Cola HBC demand Supplementary Information

Price and mix Grow the Through the process of managing all inputs to our business top line improvements well, we also create profits which benefit shareholders €426m through dividend payments and share value. net profit achieved Leverage top- Expand line growth margins

Enhanced Invest GRI topics: economic performance; market presence; indirect economic impacts. in the UN SDGs: 8, 11, 17 EBITDA growth business

Coca-Cola HBC 2017 Integrated Annual Report 19 OUR BUSINESS MODEL CONTINUED

UNDERSTANDING OUR BUSINESS MODEL

Every element of our business model is unique to our Company and has a role to play in our future long-term success.​

The resources and relationships we depend on to create value

Human Natural Social and relationship Our 29,427 people bring talent and Water is the most important ingredient Our social 'licence to operate' is due strong capabilities relevant to all for nearly all of our products. Energy, to our reputation and the trust of key aspects of our business, from community sugar, aluminium and resin are also critical stakeholders. Our most valuable and customer relations to the innovative inputs which we seek to source stakeholder relationships are with The thinking necessary to drive value growth responsibly and use efficiently. Coca-Cola Company, and our people, and efficiency. customers, suppliers and partners as well as governments and regulators.

Financial Intellectual Manufactured Our business activities require financial Our intellectual property includes As a bottler, we require production capital, which includes shareholders’ our packaging, product and cooler and logistics assets that allow us to equity, debt and reinvested cash. innovations and our operational manufacture, package and deliver our Coca-Cola HBC has only one class excellence systems. As we evolve our products to meet the demands of of shares: ordinary shares. beverage portfolio, the importance of customers and consumers. these types of innovation is increasing.

Our growth model We create demand by investing in our value with price and mix improvements. expands our profitability. Disciplined brands jointly with The Coca-Cola At the same time, we continuously management of working capital and Company. In delivering demand, we focus optimise our production and logistics capital expenditure enhances the cash on growing the non-alcoholic ready-to- infrastructure and adjust our cost base. we generate, which in turn is invested to drink category, while gaining share. Our The growth in the top line, combined with fuel growth in the business. work with our customers helps to grow an efficient and well-invested cost base, their business as well as ours, improving gives us powerful operating leverage and

Our values that guide how we create value –– Authenticity –– Learning –– Performing as one –– Excellence –– Caring for our people –– Winning with customers

20 Coca-Cola HBC 2017 Integrated Annual Report OUR STRATEGY AND KPIs

FOCUSED ON DELIVERY

Our strategy is designed to achieve responsible, sustainable and profitable growth. Strategic Report We have identified specific initiatives to drive the business and a ​2020 scorecard against which we measure our progress.

A sustainable business We create a sustainable business by growing profitably, responsibly and sustainably, and by driving positive change in our communities.

What we do Objectives Drive volume Focus on Improve Invest in to achieve our growth value efficiency the business Corporate Governance objectives All of our operations in 28 Initiatives Expand and deepen Capitalise on meals Continue production Invest in revenue‑ countries work towards the route to market and socialising infrastructure and generating assets and same objectives – drive occasions for sparkling logistics optimisation innovative technology volume growth, focus on Execute in-store with drinks value, improve efficiency excellence Capitalise on Acquire water and and invest in the business – Increase share of contiguous territory juice brands in existing by implementing initiatives Create joint value with single-serve packs, and Emerging markets territory that are designed centrally. customers driving transactions opportunities Maintain negative These initiatives are adjusted Drive the water to respond to local Improve performance Utilise shared services working capital balance category, focusing in hotels, restaurants to gain process sheet position demographics, economies on value and market characteristics and cafes (HoReCa) efficiency Financial Statements in order to manage risk Grow in the energy Drive packaging while driving growth. category harmonisation and innovation Drive pricing strategies (light-weighting)

How we measure Scorecard Average currency-neutral Comparable OpEx Capital expenditure our performance revenue growth as % of revenue We have five key 5.5- performance indicators (KPIs) 4-5% p.a. 26- that are chosen to measure our progress. We report on 6.5% of revenue these every year. Please see 27% Swiss Statutory Reporting pages 24‑25 for our 2017 by 2020 KPIs.

Comparable EBIT Working capital 11% less than by 2020 -€100m

Enablers and values Our people

Our most important enablers of growth are our people: unparalleled talent and a high-performance Supplementary Information mindset are what we strive for. Our people make our Company what it is and create value by growing our business responsibly and sustainably. Strengthening the capabilities of our people as well as engaging them and rewarding them appropriately are priorities at every level of our Company, enabling us to continue to attract and retain the best talent in every position.

Coca-Cola HBC 2017 Integrated Annual Report 21 PROGRESS ON OUR STRATEGY

ENERGISING OUR STRATEGY

Drive volume growth Focus on value

Progress against our strategy Progress against our strategy

2017 2020 2017 2020 What we said we would do What we said we would do –– Grow volumes in Emerging and Developing market segments –– Deliver a substantial increase in FX-neutral net sales revenue –– Stabilise volumes in Established markets per case –– Expand and deepen route to market –– Capitalise on occasions and HoReCa –– Increase share of single-serve packs –– Grow the energy category –– Drive pricing strategies

Challenges in 2017 Challenges in 2017 –– Economic conditions challenged our consumers in Nigeria –– Pack mix was negatively impacted in the Emerging markets and to a lesser extent in Russia segment as consumers in Nigeria and Russia continued to –– Consumers' preferences continued to evolve in our seek affordable packs and formats Established markets –– Continued growth in the organised trade had an adverse impact on channel mix

What we did in 2017 What we did in 2017 –– We revitalised our portfolios with launches of variants of our –– We increased the share of single-serve packs overall brands, most of them containing no or low sugar –– We achieved double-digit growth in the energy category –– We made changes to our route to market, e.g. in Poland –– We adjusted the price pack architecture in Nigeria and drove –– Specifically in Nigeria, we changed our price pack architecture pricing with minimal impact on volumes to provide consumers with affordable options –– We delivered improvements in FX-neutral revenue per case in –– We delivered volume growth in all three segments all three segments

Priorities for 2018 Priorities for 2018 –– Continue launches of new products, variants, flavours and –– Drive category and pack mix as well as price strategies in packaging formats countries where there is currency depreciation –– Continue to drive the water category, focusing on value –– Expand the distribution of the Monster energy brand –– Successfully migrate to the new FUZE tea brand –– Capitalise on HoReCa –– Develop Incubate & Grow unit in affluent cities in Europe

Key performance indicators Key performance indicators –– Volume growth –– FX-neutral net sales revenue per case growth (%) –– FX-neutral net sales revenue growth (%)

Risk management approach Risk management approach Addressed under principal risks Addressed under principal risks –– Consumer health and Channel mix –– Channel mix and Declining consumer demand See more on page 60 See more on pages 60 and 61

Delivered through Delivered through Being relevant to consumers Working with our customers Working with our customers Being relevant to our consumers Winning the trust of our communities

See more on pages 38 and 44 See more on pages 38, 44 and 34

22 Coca-Cola HBC 2017 Integrated Annual Report Improve efficiency Invest in the business Strategic Report

Progress against our strategy Progress against our strategy

2017 2020 2017 2020 What we said we would do What we said we would do –– Gain further efficiencies in our operating cost base –– Continue to invest in revenue-generating assets and –– Optimise production and logistics infrastructure innovative technology –– Procure and use all resources efficiently –– Acquire water and juice brands in existing territory –– Maintain discipline to ensure return on the capital invested Corporate Governance

Challenges in 2017 Challenges in 2017 –– Increased cost of commodities, e.g. PET resin –– Potential acquisition targets were either not available or did –– Increased pressure on packaging and recycling of packaging not meet our strategic and financial criteria –– One-off operating costs

What we did in 2017 What we did in 2017 Financial Statements –– We consolidated production and distribution centres in Russia –– We invested in new 'smart' coolers and in Nigeria –– We invested in infrastructure relevant to FUZE tea –– We gained efficiencies in administration and warehousing –– We developed digital solutions for production costs –– We added production capabilities for glacéau smartwater in –– We invested in marketing Hungary –– We fully delivered on our packaging recycling target

Priorities for 2018 Priorities for 2018 –– Continue to optimise production and logistics –– Invest to support the production of plant-based beverages, –– Make further enhancements to procurement processes juice smoothies, and PET juice packaging in Nigeria –– Review our sustainability commitments with a view –– Continue optimising and investing in our production in Nigeria Swiss Statutory Reporting beyond 2020 –– Maintain working capital discipline

Key performance indicators Key performance indicators –– OpEx as percentage of net sales revenue (%) –– CapEx as percentage of net sales revenue (%) –– Comparable EBIT margin (%) –– ROIC (%)

Risk management approach Risk management approach Managed as an operational risk by the business units and Managed as an operational risk by the business units and

functions in line with our risk management processes functions in line with our risk management processes Supplementary Information

Delivered through Delivered through Efficiencies Efficiencies Winning the trust of our communities Being relevant to our consumers

See more on pages 48 and 34 See more on pages 48 and 38

Coca-Cola HBC 2017 Integrated Annual Report 23 OUR KEY PERFORMANCE INDICATORS

A STRONG TRACK RECORD

Objectives Drive volume growth Focus on value

How we track Volume is measured in million cases sold, where Net sales revenue (NSR) comprises revenues from Coca‑Cola HBC’s our progress one unit case represents 5.678 litres. primary activities. We track this on an FX-neutral basis. Net sales revenue generated per case sold is calculated on an FX‑neutral basis.

What happened Volumes grew by 2.2% , with particularly strong FX-neutral revenue per case grew strongly, up 3.6%, supported by better in the year growth in our Emerging and Developing markets, price, category and package mix in all segments.​ despite a challenging operating environment in both Nigeria and Russia.​

KPIs Volume FX-neutral revenue FX-neutral revenue (m unit cases) per case growth (%) growth (%)

Link to Volume is a measure for MIP awards. Net sales revenue is a financial measure for MIP awards. remuneration See page 104

Underpinned by our enablers and values Objectives Nurture unparalleled talent and a high-performance mindset

How we We track the percentage of employees responding positively to a Group-wide engagement survey. measure our We record the number of key people in key positions and the number of women in our Company. performance

What happened Based on survey results, the employee engagement score was 89% in 2017. 92% of our key people were in key in the year positions – up from 87% in 2016. Women make up 26% of our total workforce, 35% of our managers, 35% of our senior leaders and 25% of our Board of Directors.

KPIs Employee engagement Key people in Women in score (%) key positions (%) management (%)

24 Coca-Cola HBC 2017 Integrated Annual Report Annual target = 2020 target =

Improve efficiency Invest in the business Strategic Report

OpEx (operating expenses) as a percentage of net sales revenue Working capital is operating current assets minus operating current is calculated by dividing comparable operating expenses by total net liabilities, excluding financing and investment activities. sales revenue. CapEx (capital expenditure) is calculated as a percentage of NSR. Comparable EBIT margin refers to comparable profit before tax excluding finance income or cost and share of results of equity method Return on invested capital (ROIC) is comparable operating profit before investments divided by net sales revenue. finance costs divided by capital employed (average equity and net debt).

Operating leverage resulted in a 30 basis-point reduction in OpEx as a We kept the year-end working capital balance sheet position under negative percentage of revenue. This, combined with the improvement in gross €100 million. We increased capital expenditure to 5.8% of revenue to margin, gave us 120 basis-point expansion in comparable EBIT margin. support the growth opportunities in our business. Corporate Governance

OpEx as percentage Comparable EBIT CapEx as percentage ROIC of NSR (%) margin (%) of NSR (%) (%)

Financial Statements

OpEx as a percentage of NSR and comparable EBIT are financial Working capital acts as a qualifier for the volume MIP payout. measures for MIP awards. ROIC is a financial measure for PSP awards.

2020 sustainability targets status update

Avg. 40% of 20% of PET 25% less 30% water use Water 10% reduction

total packaging sourced from packaging per reduction in stewardship in added sugar Swiss Statutory Reporting recovered for rPET and/or PET litre of beverage operations* certification for per 100 ml of recycling from renewable produced* all plants sparkling materials -21% beverage in 41% 18% 26 EU&CH 9% -5%

Community 10% of our >95% of key 50% less direct 25% less carbon 40% of total Supplementary Information investment at people agricultural carbon emissions in energy from 2% of pre-tax volunteering ingredients emissions* value chain * clean and profit during work sustainably renewable hours sourced -42% -23% energy sources 1.3% 11% 33% 34%

Status at the end of 2017 Fully on track Partly on track Step-up required​ (*) versus baseline year Coca-Cola HBC 2017 Integrated Annual Report 25 Dimitris Lois 1961-2017

26 Coca-Cola HBC 2017 Integrated Annual Report The safest“ way to win is to deserve it

Dimitris Lois had been our leader at Coca-Cola HBC for nine years until his untimely” and sudden death in 2017. He was a willing mentor and inspiration to the whole Coca-Cola HBC family. Under Dimitris’s leadership, our Company has gone from strength to strength. In 2017, Dimitris launched a photo competition designed to capture and celebrate life at Coca-Cola HBC. Throughout this report, you will see photographs taken by our people within the business – a fitting epitaph to an inspirational leader.

Coca-Cola HBC 2017 Integrated Annual Report 27 OUR STRATEGY IN ACTION: PEOPLE

CREATING AN INSPIRING WORKPLACE FOR OUR PEOPLE We seek to offer a workplace where our people are inspired to take advantage of opportunities to learn, grow and take charge of their careers.

Our people and our culture: Every leader is accountable for delivering 2017 progress catalysing our evolution in each area, as our leadership plays an –– Improved talent pool, working on our essential role in enhancing the capabilities Our journey to evolve our Company and to key positions and refined employer of our people and in strengthening make a distinct difference for a better and value proposition to aid in attracting our culture. and hiring the best people happier world is supported by the capabilities of our people and the strength –– Upgraded our revenue growth of our culture. We seek to offer a workplace High levels of employee management, route-to-market where our people can enjoy accelerated engagement and customer-centric market personal growth, where they are celebrated execution capabilities We believe high employee engagement as they deliver results with speed and agility, leads to best-in-class performance. –– Employee Engagement and and where diverse backgrounds and Successfully engaging our people Values Indices increased to perspectives are always welcome. is therefore a material issue which we 89% and 91%, respectively take seriously. –– New cloud-based applications Our people strategy supports the long- deployed to digitalise learning term success of our business by We conduct an employee engagement and to simplify our processes emphasising workforce engagement and survey annually, and partner with Willis growth behaviours, and developing the Towers Watson to benchmark our capabilities, leadership and talent that are performance against other companies in 2018 priorities necessary for the evolution of our the Coca‑Cola System as well as other –– Continued focus to have the Company. The three focus areas of this high-performing companies. We are best person in every position approach are: pleased by our progress during 2017, with –– Maintaining employee engagement –– Maintain high levels of employee our Employee Engagement Index score and commitment to Company values engagement and commitment to increasing to 89% from 88% in the prior –– Further developing skills and Company values and make our business year. Survey participation also increased to capabilities to take advantage of more agile and innovative; include 97% of our people. growth opportunities –– Focus more than ever on developing Our engagement results for 2017 –– Making our business more skills and capabilities to take advantage of meant not only that we remained the agile and innovative growth opportunities; and benchmark in the Coca-Cola System, –– Have the best person in every position but also that we retained a leading position today and tomorrow. in our industry and among the Willis Towers Watson benchmarking pool of high-performing companies.

28 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance Financial Statements

The results are also considerably higher Living our values and making our Direct employment than the 80% average for FTSE 100 culture more agile and innovative companies participating in this pool. Everything in our Company starts with our Results from this survey are reviewed, and six core values: authenticity, excellence, 29,427 our people may be challenged to suggest learning, caring for our people, performing (2016: 31,083) ideas for improvements or solutions to as one and winning with customers. These remove barriers to their performance. This values represent the foundation of our level of vigilance ensures that engagement Company culture. Key people in key positions levels are sustained and business results We promote behaviours that embody our Swiss Statutory Reporting are improved. values, such as adopting innovative ideas with speed, taking risks and learning from 92% Employee engagement: both winning and failing. We have likewise (2016: 87%) outperforming peer companies (%) identified behaviours we aim to eliminate, such as accepting the status quo or failing Employee Engagement Index 90 to respond to customer needs. As is the case with employee engagement, 84 we closely monitor our progress in embedding and living our values. Our Values 89% CCHBC 89 CCHBC (2016: 88%) CCHBC 88 CCHBC Index captures employees’ awareness of 78 87 CCHBC and commitment to the values. The survey Supplementary Information also asks employees their opinion about the Values Index 72 relevance of the values. FTSE 100 80 FTSE FMCG norm 81 FMCG Coca-Cola Bottlers 86 Bottlers Coca-Cola Coca-Cola System 85 System Coca-Cola High-performing norm 88 High-performing 66 91% (2016: 90%) 60 15 16 17 17 17 17 17 17 Data for FTSE 100 companies and high-performing companies represents those companies participating in Willis Towers Watson benchmarking. This does not include all FTSE 100 companies.

Coca-Cola HBC 2017 Integrated Annual Report 29 OUR STRATEGY IN ACTION: PEOPLE CONTINUED

well as the knowledge and skills of positions across all segments that have our people. a disproportionate impact on the Company’s performance. We made particularly strong progress during 2017 in bolstering our internal As of the end of 2017, 92% of our key capabilities in revenue growth management positions are occupied by key people, and route-to-market capabilities. In 2018, compared with 87% at the end of 2016. we are poised to continue this work in even Our focus on succession for business unit Every digital people more areas to support our Company’s function heads also paid off as we enriched conversation starts evolution and growth. our successor pool for this critical workforce segment in 2017. with a simple HELO. To match internal skills with business needs, We further digitalised our workplace our learning and leadership development To support our efforts to recruit the best by introducing new cloud-based architecture reflects the priorities of our people into all positions, we refreshed our applications under the new HELO business strategy. We have identified when employer value proposition with platform. This is designed to help our learning needs to happen to be the most customised benefits for different workforce people to grow, learn and lead within impactful and where development is segments. In 2018, we will finalise updates our organisation. needed, focusing on prioritised skills and to our employer brand and digital performance differentiators that can communication to talent pools. Finally, our From the results of our annual Values Index accelerate the performance of all our recruiters have received training in using survey, we know that over 90% of our people. In 2017, we completed an upgrade new candidate selection tools. of our core leadership development employees are aware of and committed to Our ability to develop leaders internally is an programmes and we significantly improved our values, and 88% find them relevant and important competitive advantage, ensuring our onboarding, induction and leadership useful. These numbers are components of cultural continuity. Career progression in transition programmes. These our overall Value Index, which was 91% for our Company depends on performance programmes are increasingly blended, 2017, a 1% improvement on the prior year. against standards, potential and alignment using technology to engage wider with core values. Leadership acceleration Our performance framework links team communities, with line manager resources centres have been established to support performance and individual results, actions to sustain development and maximise developing successors for leadership and skills, and aligns to our six core values. learning from critical work experiences. Our team performance management positions. They help our people understand system allows us to bridge our strategy New cloud-based applications introduced in their strengths and the areas of opportunity and its execution by aligning priorities 2017 empower our people with more for their development in their current and across functions and teams and applying accessible tools for learning, onboarding future roles. and recruitment. Additional applications an iterative ‘plan, act and review’ cycle to To accelerate the development of our deployed for performance and talent improve output continuously. In 2017, people with leadership potential, we offer management will be introduced, extending we fully deployed this approach across experiential learning to build new skills the scope of this platform, which we call our territory. through our Fast Forward programmes. In HELO (hiring, empowering and 2017, we redesigned three Fast Forward To ensure that our people balance short- learning online). and long-term objectives, in addition to programmes and introduced one new Fast assessing performance against financial HELO is available to all our employees, Forward programme for a segment not objectives, we also plan and measure democratising learning, accelerating previously covered. We also upgraded achievement for innovation, fostering of development and helping our people fulfil our management trainee programme partnerships, people leadership, managing their potential. with an aim to make it more relevant for resources, and compliance with policies the new generation of graduates and a and procedures. The best person in every position more effective entry point for our leadership pipeline. We continue improving and simplifying the Having the best people in every position elements of this framework to support today and tomorrow is an important issue Our leadership plays an essential role in growth and create a line of sight between and it is the underlying principle of our ensuring that we have the best people in our values and behaviours and our results. decision‑making processes, placing the every position, with every leader development of our people at the centre accountable for attracting, developing, of everything we do. Strengthening capabilities retaining and engaging the right talent and then empowering them to execute our Every position contributes to our success, Evolving our business to offer a total strategy. As our programmes and tools but every workforce segment delivers beverage portfolio requires specific have been improved and streamlined, our different types of results and requires organisational capabilities. We are building leaders have become even more motivated different skills. We have segmented our the capabilities our business needs to grow and engaged. by improving our business processes, workforce to target recruitment and structures and performance systems as development efforts, and identified key

30 Coca-Cola HBC 2017 Integrated Annual Report Championing inclusion, diversity participate in a webinar series called We are pleased that once again, in 2017 Strategic Report and human rights Elevate, which helps women understand Coca-Cola HBC received no fines for how to drive their performance, impact non-compliance with human rights-related We believe that fostering a workforce that and exposure. laws and regulations. reflects the diversity of our markets is essential to remaining the strategic partner Our Human Rights Policy adheres to UN Sustainable Development Goals 5 and of choice for all our customers. Our international human rights standards and 16 are supported through our activities and business benefits greatly from the diverse covers issues such as diversity, collective initiatives to champion human rights and range of people who work for us, and we bargaining and workplace security. Regular diversity. These relate to gender equality actively seek to attract and retain reviews ensure that we adhere to all and peace, justice and strong institutions. employees with a range of backgrounds, applicable laws and regulations, that skills and experiences. Beyond our own processes are well implemented, that footprint, we champion international targets are set and reached and that Corporate Governance human rights principles in our supply reporting is timely and accurate. chain and expect our partners to uphold We also maintain a zero-tolerance prized workplace values. approach to breaches of our Code of We know that to maximise everyone’s Business Conduct, or of our anti-bribery contribution, we must ensure that every policies, and regarding retaliation against employee feels respected and heard. This individuals who in good faith report is why respect for individuals is at the core potential violations. of our values, and why we foster behaviours We have established grievance that create an inclusive culture. These mechanisms, including an independently behaviours are enshrined in our formal operated whistle-blower hotline, available Inclusion and Diversity Policy, our Code Financial Statements in all Coca-Cola HBC countries in local Key position bench strength of Business Conduct and our Human languages. In 2017, we received 292 Rights Policy. allegations, of which 98 were received At the end of 2017, 35% of management through the whistle-blower hotline. 57% roles in our Company were held by women, For details concerning the handling of (2016: 50%) a 2% increase vs 2016. We foster diversity allegations received in 2017 see our in our talent pipeline by recruiting a website. We ran a dedicated ‘Human rights balanced number of male and female week’ campaign across all our 28 countries, management trainees. In keeping with this as part of our annual ‘Ethics and compliance approach, 49% of the 181 management week’. Beyond these dedicated weeks, trainees we hired in 2017 were women. ongoing training on human rights and ethics

is also provided. Swiss Statutory Reporting As an example of our efforts to foster the success of women in management, we support women to develop their confidence and leadership skills. More than 1,300 women employees were invited to

Talent pipeline improved

​ 2017 2016 Key people in key positions (‘KPo’) 92%​ 87% Key position succession rate 0.69​ 0.67 Key position bench strength (% of key positions with Supplementary Information successors ready now or within the year) 57%​ 50% Turnover of key people 6%​ 5% Total turnover rate 13%​ 12% Management trainees 181​ 231 Participants in Fast Forward programmes 612​ 902 Promotion rate for Fast Forward programme participants 75%​ 71% Total number of employees in leadership acceleration centres 5,596​ 3,525 % of workforce covered during annual people review 53%​ 46%

Coca-Cola HBC 2017 Integrated Annual Report 31 OUR STRATEGY IN ACTION: PEOPLE CONTINUED

The health and safety of our While we are pleased with our Countries have also covered emotional people is paramount improvements, we are determined to do well-being through on-site counselling, more to ensure employee safety and relaxation techniques, and energy balance While health and safety has always been well-being. After analysing the causes of all programmes; and social well-being with closely monitored as a strategic risk, we accidents and near-misses, we launched a family days, Christmas events, employee elevated it to a principal risk in 2017. This new behaviour-based safety programme to bonding days and teambuilding events. emphasises the critical importance of create a truly proactive safety culture. In ensuring the safety and well-being of our We have a well-being toolkit for countries, 2017, we introduced this programme at employees and contractors, and the safety sharing best practice approaches for four company sites in Italy, Hungary, of others in the workplace. We know that an developing holistic employee well-being Northern Ireland and Serbia. We will use the enabling and socially supportive work programmes, and in 2017 we introduced a insights from these locations to deploy the environment fosters sustained guide to help managers recognise, prevent programme in manufacturing sites and engagement. To address this, we seek to and manage work and personal stress in selected logistics units in 2018. create a culture of well-being that themselves and their teams. Training was exemplifies our values and enhances This behaviour-based programme also provided to our HR business partners in productivity and our reputation. complements safety reviews of our a ‘train the trainer’ approach to help our manufacturing sites, our safety recognition managers manage stress. For the eighth consecutive year in 2017, the programmes and our Safety week. In 2017, number of employee workplace accidents Five of our markets invested in employees' we conducted full-scope safety fell. In 2017, the Lost Time Accident Rate core energy needs to fuel their passion, assessments in eight manufacturing (LTAR) was 0.40, compared with 0.43 the resilience and excitement about work. locations and we upgraded our safety prior year. Through the Energy Project programme recognition programmes. Activities our people learn how to recognise their While we continue to improve our focus on for our 2017 Safety week provided energy-draining habits, and are encouraged safety, we regret that four employees and helpful information on driving safety, to take responsibility for changing them, four contractors lost their lives in fatal road manual handling, falls and slips and using various techniques to improve their traffic accidents in 2017. While we have contractor management. physical, emotional, mental and spiritual worked hard to strengthen our vehicle energy. Energy level increased by 14% safety programmes, each of these Well-being and sustaining energy based on our energy audit for these tragedies was caused by other drivers. during work business units. Our Fleet Safety Policy and training Under our well-being umbrella, we have Our initiatives for well-being and safety programmes were improved in 2017, developed a Health and Dependent Care contribute to UN Sustainable Development providing customised approaches for Framework which includes two pillars, one Goals 3 and 8, which relate to good health different types of drivers within the Group. related to health care and the other to and well-being and decent work and The blend of online, classroom and dependent care. Within each pillar there are economic growth, respectively. on-the-road training elements is adjusted a number of initiatives from which our for different groups, reflecting their relative countries provide at least one initiative per risk classification. Overall, 7,366 employees pillar to the employees. Regarding health 56% improvement on fleet received training in these programmes care, these initiatives include: employee accidents over the last five years in 2017. medical and health insurance benefits; vaccination programmes, cancer screening We also continued installing collision and other preventative health measures; avoidance technology in fleet vehicles, and on-site sports and gym facilities, as well as 82.5% of the Company’s light fleet vehicles subsidised gym memberships; and nutrition are now equipped with OEM or MobilEye information. Regarding dependent care, collision driver warning technology to these initiatives include days off for avoid collisions. dependent care, subsidies for school As a result of these efforts, the number of activities and supplies, internships and accidents per million kilometres travelled career days. To help employees financially, fell to 3.92 in 2017, a 7% reduction as well as benefits such as pensions and compared to 2016. This was our fifth savings schemes and life insurance, consecutive year of improvement, resulting measures have included financial planning in a cumulative reduction of 56%. and literacy and a variety of partner discount programmes. Accidents per million kilometres travelled.

32 Coca-Cola HBC 2017 Integrated Annual Report Values in action

Number of lost time accidents Strategic Report Adopting innovative ideas Network participants shared almost 100 (LTA>1 day) MMLE ideas and successful practices, Awards for ‘Vegified’, ‘Impulse triggering many ‘likes’ and online screens’ and ‘Illuminated bridge’ discussions as well as voluntary adoption across several business units. To accelerate our culture of 120 The majority of posts were around entrepreneurship and innovation we (13% reduction vs 2016) thoughtful email communication operate an innovation platform across practices, effective meeting eight business units of the Company Fleet accidents per million management, improvements in called Ideas for Growth. The ideation workplace conditions, caring leadership kilometres travelled process, the tools, the programmes and behaviours and reducing complexity of the communication solutions represent how we operate and communicate. Many Corporate Governance the critical ingredients of the platform. of the practices provided tips to leverage 3.92 We recognise the best innovations, our tools and technology applications (7% reduction vs 2016) and in 2017 23 ideas were shortlisted and better, further digitalising our workplace. the following three won Absenteeism days due to sickness Innovation Awards: Recognising deeply held values per full‑time employee –– ‘Vegified’ – a new juice product and behaviours fortified with vitamins, developed and marketed in Ireland; We reinforce values through many –– ‘Impulse screens’ – a solution to recognition programmes in our 1.67 increase impulse consumption in countries.

(2% reduction vs 2016)​ Financial Statements stores, launched in Greece; and To motivate high performance, inject –– the ‘Illuminated bridge’ – where 5,000 entrepreneurial spirit and encourage glass Coke bottles formed a replica values ambassadors, our Russian Understand of Croatia’s biggest bridge. business unit has introduced ‘Premier League’, an employee recognition We know that engaged employees The award event also looked ahead into programme. Through an innovative from diverse backgrounds and with 2018 and recognised six new bold ideas platform, employees recognised their different perspectives are critical to our as ‘Big Bet Ideas’ including a suggestive colleagues and teams exhibiting value ability to serve consumers, customers selling competition to increase sparkling behaviours more than 8,000 times and communities. incidence in HoReCa. during 2017. Evolve Listening and acting to remove In Romania our programme includes We are working to develop blockages to performance awards that recognise individuals and Swiss Statutory Reporting key capabilities and a more agile, teams that have a high-performance innovative culture. ‘Make My Life Easy’ – the most mindset, inspire others by creating a popular in-house social media positive work environment, exceed customer expectations, take action Energise network in 2017 towards innovation and optimisation We make substantial investments To achieve more with less, eliminating and are active Coke ambassadors. in recruiting, attracting, training and unnecessary blockages to performance retaining talented people to ensure is the guiding idea behind our ‘Make My The platform facilitates on-the-spot our long-term success. Life Easy’ (MMLE) initiative. Among other recognition, through which employees ways of sharing and spreading MMLE can endorse any colleague for a specific ideas, we operate an in-house voluntary behaviour. Over 400 badges were social media network that became the granted on the digital platform in the Supplementary Information Company's most popular network in second half of 2017. 2017 among our employees.

Coca-Cola HBC 2017 Integrated Annual Report 33 OUR STRATEGY IN ACTION: COMMUNITIES

BUILDING TRUST WITH OUR COMMUNITIES We are a trusted partner in the communities in which we operate because of the way we run our business and work with stakeholders to deliver value locally. This trust gives us licence to be ever more ambitious in tackling societal challenges.

2017 investments programmes aligned to three key strategic 2017 progress In 2017, we invested €7.4 million in our priorities: –– 21 countries launched communities, which is 2% more than 2016 –– Youth development #YouthEmpowered, our flagship and is equivalent to 1.3% of our pre-tax community programme profit. The biggest proportion of this –– Environmental and water stewardship –– 2,767 tonnes of waste were collected investment was allocated to youth –– Community well-being from river banks and sea shores development, as seen in the chart below, and more specifically to our flagship –– 18,118 employee hours volunteered Focus of community during worktime #YouthEmpowered programme (see page 35). investment Alongside financial investments, we enable 2018 priorities employees to volunteer a portion of their –– #YouthEmpowered rolled out in working week to support community all Coca-Cola HBC countries and programmes. This not only positively DigiHub go-live in 19 countries impacts our communities, but also provides learning and development opportunities for –– Enhanced focus on water basins our employees and supports employee and marine protection engagement and well-being. –– Shift focus from output to measuring and reporting on the impact of key In 2017, our employees volunteered more than 18,118 work hours in support of community programmes strategic community programmes.

While we continue to report this data, we outmpowere an oter recognise these figures represent inputs yout programmes 38% and not the effectiveness of our efforts, an Community welleing 35% issue we will be addressing during 2018. ater an environmental protection 12% mergency relief 1% ter 14% Strategic priorities for community investment In addition, we are active in emergency Over the years, our community relief efforts, providing help in times investments have evolved from of disaster, either directly or via our philanthropic initiatives to long-term stakeholder partnerships.

34 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance

#YE Greece workshop in Thessaloniki Financial Statements

Youth development In 2017, we ran live workshops in 21 As a result of these targeted efforts, We believe in harnessing the potential of countries and piloted free online e-learning at the end of the pilot year 2017, already young people for the benefit of our and mentorship platforms in Greece, Italy more than 100 young people reported communities. While levels of youth and Nigeria, with plans to engage 16 more having found employment. countries in the #YouthEmpowered unemployment vary from country to Eventually, our strategic business goal is to community through an online platform country – from 3% in Switzerland to more integrate #YouthEmpowered graduates in in 2018. than 60% in Bosnia – it remains an urgent our own workforce or into meaningful roles concern in all the countries in which we This initiative makes substantial with our customers and partners. We also are active. contributions to SDG 8: Decent work and expect to see a benefit in terms of Swiss Statutory Reporting This led us to launch #YouthEmpowered in economic growth, and SDG 11: Sustainable employee engagement and pride in the 2017, a Group-wide flagship initiative to cities and communities. Company, and improved opportunities for the participants. We are currently refining help young people to achieve their career Results from the 2017 pilots include: ambitions by providing guidance, support our targets based on the learnings from the and assistance during their transition from –– >21,500 youths participated either pilot programmes and will report more school to meaningful employment. though live workshops/training or in an detail on programme impacts in 2018. engaging online session with value- To help youth develop business acumen adding e-learning skills content; and other skills, we have developed –– >550 of our employees became mentors; Belarus #YE in-person and online training, alongside –– >3,200 hours of employee volunteer time mentoring sessions with our employees was dedicated exclusively to helping

that help participants to complete a range Supplementary Information young participants; and of programme activities. In addition, –– >6,500 online learners participated in our #YouthEmpowered enables young people free, innovative educational platforms. to build valuable and long-lasting professional and personal networks that Within #YouthEmpowered, we tailor our create employment and life opportunities. approach to address specific needs in different countries.

Belarus #YE workshop for people with disabilities.

Coca-Cola HBC 2017 Integrated Annual Report 35 OUR STRATEGY IN ACTION: COMMUNITIES CONTINUED

Serbia #YE Environmental protection With the dedicated support of employee and water stewardship volunteers, in 2017 we collected 2,767 tonnes of waste at river and sea shores and Our focus on natural resources follows a cleaned more than 1,950 kilometres of river two-pronged approach. First, we are driving banks and beaches. During the same time improvements in eco-efficiency within our period, we have also contributed to operations, e.g. minimising our water reforestation by planting more than consumption and replenishing the water we 109,696 trees in over 203,400 square use in our manufacturing processes. metres of land. Second, we prioritise support for community water stewardship programmes Our contributions in this area aid global to protect water sources, wetlands, progress toward SDG 6: Clean water and biodiversity and ecological processes. sanitation, and SDG 13: Climate action. Our 2020 commitment is to improve our During 2017, we have also further water intensity ratio by 30% compared to consolidated our environmental community our 2010 baseline and we are on track to initiatives. Consequently, our future efforts achieve this. In 2017, the level of reduction will be more clearly focused on water and reached 21% vs 2010. Our Top 10 Water environmental protection. Savers programme is mandatory for all our Serbia #YE launch: Aleksandar Ruzevic, plants, encouraging water saving GM of CCH Serbia, Aleksandar Vulin, Community well-being developments and initiatives throughout Minister of Labour, Employment and Social As well as being committed to reducing the our facilities. The current implementation Policy of Serbia (from April 2014 to June amount of sugar in our products by 2020 rate is 72.3% and in addition we 2017), Zoran Martinović, Director of the (see Consumers section), we continue to implemented more than 110 water saving National Employment Service and Ninoslav support initiatives across our 28 countries projects that saved 1.5 million cubic metres Erić, President of the Cuprija municipality, to improve community well-being and of water in our plants. At the end of 2017, one of the 14 municipalities we collaborated health. These encourage physical activity we achieved 26 Gold certificates under the with in Serbia. and include the installation of active zones, European Water Stewardship Standard and walking trails and paths, and support for we have committed to certify 100% of our Nigeria #YE sports events and social gatherings. Many plants by 2020 to the European Water of the programmes are implemented in Stewardship Standard or Alliance for Water partnership with The Coca-Cola Company. Stewardship. We also consider water used in agriculture as part of our supplier These programmes contribute to SDG 3: evaluation assessments. Good health and well-being, and SDG 11: Sustainable cities and communities. As our By implementing water stewardship business and product portfolio evolves, we programmes at the community level, we expect that more of our impact on well-being help to preserve the natural habitat of key will come directly from new products that water basins and access to clean water. support healthy lifestyles. Moreover, we invest in programmes to prevent environmental damage from packaging waste and climate change. All activities are done in partnership with or after engaging local water users, authorities and other key stakeholders in the community. We also work together with environmental ministries, and intergovernmental and civil organisations, to preserve and protect important ecosystems. Nigeria #YE launch in Port Harcourt with We invested €1 million in environmental the River State Commissioner for community programmes during 2017. Employment and Empowerment opening FYROM: five new free active zones installed the event. in Skopje.

36 Coca-Cola HBC 2017 Integrated Annual Report Stakeholder partnerships Looking ahead Strategic Report Understand We have a long record of delivering We will continue the roll-out of Building and maintaining trust meaningful community programmes by #YouthEmpowered in 2018, with the aim involves understanding what our investing creativity, innovation and of reaching all our markets by year end. stakeholders value. resources and ensuring that our efforts We are also excited to launch the align with our own strategic interests. We #YouthEmpowered DigiHub, our innovative carefully measure the value that we add and Evolve online educational and mentorship are constantly looking for opportunities to While our approach is consistently platform, in 19 countries in 2018. partner with local stakeholders to combine strategic, our community investment our expertise and maximise this value. This We will continue driving water and reflects the evolving needs of the also contributes to SDG 17: Partnerships. environmental protection through specific communities in which we work.

water stewardship programmes to Corporate Governance In 2017, this led us to work with more than preserve water sources and wetlands. 300 non-governmental organisations and Energise non-trade partners in 28 countries, Overall, our approach has become more Our ambitious 2020 commitments including the International Federation of the strategic and we are also applying better provide internal momentum and allow Red Cross, the International Commission metrics to measure and manage the us to make substantial contributions for the Preservation of the Danube River, impacts of our key community to global progress towards the UN’s World Wide Fund for Nature, Junior programmes, with focus on both youth Sustainable Development Goals. Achievement, Teach for All and the Global development and environmental and water Water Partnership. stewardship. We will report on our progress in these areas in our 2018 Integrated Annual Report. Financial Statements

Greece – Mission Water Greece is projected to be among the In 2017, the programme worked with most water-stressed countries by 2040, local authorities to install three new with water scarcity a particular concern on water storage tanks on Kythera island, the Greek islands. which was suffering a water shortage crisis, increasing the municipal water The Mission Water programme has supply's volume. promoted water conservation, primarily through rainwater harvesting on dry Kythera is the 31st island to be aided Swiss Statutory Reporting islands, since 2006. The project involves by the programme. a partnership between the Coca-Cola System in Greece , Global Water Partnership – Mediterranean (‘GWP‑ Med’) and authorities. with funding from The Coca-Cola Foundation since 2011.

Armenia – ASPIRED project In Armenia, we have joined forces previously dumped into the drainage

with the United States Agency for network, is now used for irrigating Supplementary Information International Development (USAID) to farmland. This has benefited the Hayanist help communities denied reliable access community, where workforce migration to water as a result of uncontrolled water decreased by 50-60% because the use by fish farms. Hayanist are able to cultivate land again. Our joint project, the Advanced Science As a result, 1.1 million cubic metres and Partnerships for Integrated Resource of water was saved, 11 times the Development (ASPIRED) project, amount used annually by our Armenian implemented an initiative during 2017 manufacturing site. to reduce groundwater use in the Ararat Valley. Water from fisheries, which was

Coca-Cola HBC 2017 Integrated Annual Report 37 OUR STRATEGY IN ACTION: CONSUMERS

INNOVATING OUR PORTFOLIO FOR OUR CONSUMERS People’s tastes and lifestyles are changing and with that comes a desire for different drink choices.

An evolving portfolio for Coca-Cola HBC has committed, in 2017 progress a healthier world partnership with the Union of European –– Excellent growth from our low- and Soft Drinks Associations (UNESDA), to Our focus is on providing healthier new no-sugar portfolio; with positive reduce sugar in sparkling soft drinks by 10% options across our portfolio of sparkling and customer reactions to both between 2015 and 2020 across the EU and still beverages, and emphasising low or reformulations and no-sugar variants Switzerland. With more than 30 years of no-sugar choices to our consumers. –– Adult-focused flavours and brands experience in launching low- and no-calorie These efforts are helping us to maintain saw strong growth beverages, we are on track to achieve this our strength in sparkling beverages and goal with a reduction of nearly 5% in 2017 –– Second year of growth above 20% we also have strong foundations on which compared to 2016. We achieved our sugar in energy drinks to grow in the stills category, since 30% reduction target in 2017 through our –– Growth, with a focus on value in stills. of our revenues are from still drinks, the portfolio evolution towards no-sugar –– Ongoing progress on creating a highest proportion amongst the listed variants and reformulations with lower nimble organisation that can manage Coca-Cola bottlers. sugar content. For that purpose, we are a faster pace of launches On average people in our markets drink six accelerating the rollout of our pipeline beverages each day, and although our share across all innovation pillars, i.e. 2018 priorities in sparkling soft drinks is at an average of reformulation of existing products, more 43% across our markets, our share of total zero-sugar formulations with improved –– 2018 will see more launches from beverage consumption is still low at around taste, new products with low or no sugar Coca-Cola HBC than at any time in 5%, which offers huge potential for growth. and the development of small packages. recent history, both within the existing Our evolving portfolio equips us to better portfolio and in new categories We are applying a holistic approach to the serve consumers at every occasion in which reduction of sugar which considers they want to enjoy a drink, which, when sweetness taste profiles, the impact on combined with our ability to get this appearance, mouthfeel and taste portfolio into the hands of our end and advanced sensory knowledge. Our aim consumer, allows us opportunities to better is to produce drinks with fewer calories, that serve our consumers and grow our consumers love. We believe these efforts business sustainably. support progress toward several of the Sustainable Development Goals (SDGs) adopted by the UN, including SDG 3: Good health and well-being, SDG 9: Industry innovation and infrastructure, and SDG 12: Responsible consumption and production.

38 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance Financial Statements

We support, along with The Coca-Cola We initiated a pilot of this approach at the Fanta and Sprite Company, the recommendation of the start of 2017 in Poland and Romania with In Fanta, a combination of ongoing World Health Organization and other health excellent results. Sales grew, versus a innovation and strong market activation authorities that intake of added sugar control group, for both Coke Zero and for delivered growth. New flavour launches for should be no more than 10% of total energy Trademark Coca-Cola overall. We Fanta, including Dragonfruit, Shokata and or calories consumed per day. subsequently rolled out ‘One Brand’ Raspberry, helped to keep excitement in throughout our markets. In addition, we the brand high. Sprite Cucumber was Trademark Coca-Cola brands completed the relaunch of Coke Zero by launched in Russia early in 2017, and strong February 2017 and launched new light To highlight our evolving approach to our execution of the launch and fast distribution

variants such as Coca-Cola Zero with Swiss Statutory Reporting brands and to build awareness of low- and supported double-digit year-on-year Lemon, which achieved 88% distribution no-sugar drinks, we launched the ‘One growth for Sprite in Russia. within 20 weeks of launch. This strong Brand’ marketing strategy in Trademark execution supported growth for Trademark Fanta and Sprite are also benefiting from Coca-Cola in collaboration with The Coke variants exceeding that of the innovative reformulations to reduce their Coca-Cola Company. With ‘One Brand’ sparkling drinks category overall in our sugar content. Sprite Fresh contains half we offer our consumers a Coca-Cola with markets in 2017 (2.7% and 2.3% the sugar of the original version, while Fanta a range of choices: Coke Zero; Coca-Cola respectively). These results were aided by Orange contains 30% less sugar than Light; or Coca-Cola. the 22% growth in sales of Coke Zero regular Fanta. We began the rollout of As the category leader, we believe it is our during the year. Sprite Fresh in 2017 and will roll out the responsibility to actively shape consumer reformulated Fanta Orange in 2018. We are choice towards lower calorie options. In also launching no-calorie Fanta Lemon in a order to achieve this we have taken the number of our markets in 2018. Supplementary Information decision to make the sugar-free variants of Coke the focal point in marketing efforts and are dedicating a greater proportion of shelf space to sugar-free Coke variants than their current share of the mix, ensuring increased prominence and availability of our sugar-free Coke drinks.

Coca-Cola HBC 2017 Integrated Annual Report 39 OUR STRATEGY IN ACTION: CONSUMERS CONTINUED

Growth in energy Driving the water and juice Energy remains a small category for us, but categories while focusing one that is growing fast and with attractive on value creation revenue per case. For the second year in a Water represents 30% of the underlying row our sales in the energy category grew non-alcoholic beverage market value over 20%. We aim to sustain our growth in across our regions and is expected to drive the energy segment with a dual brand almost a quarter of the non-alcoholic strategy focused on Burn and Monster. beverage incremental value growth to With the launch of Monster in Nigeria in 2020. The fastest growth is expected to be 2017, the brand is now available in all but seen in the premium segment including three of our countries. water with functional benefits or flavours. We are currently under-indexed to water Growing adult opportunity with under 20% of our volumes coming As the overall population in Europe is from the category. getting older, there is greater demand for We intend to grow our water business in line sophisticated flavour profiles and for adult with two pillars. The first is to grow our sparkling beverages. Two of our brands existing mainstream brands while enriching targeted to this consumer segment are the portfolio with flavoured water, and the Schweppes and Kinley. For Schweppes, our second is to enter new premium segments. premiumisation strategy, combined with a strong launch of Schweppes Pomegranate To meet growing consumer interest in the during the year, helped to deliver mid juice category we are evolving our offering single-digit growth for the brand. We are to include more innovative flavours and excited about the launch of Coca-Cola’s no-added-sugar varieties, while working to Royal Bliss brand in a few of our countries in grow value in excess of volume. In Russia, 2018. Royal Bliss is a line of premium mixers, for example, we launched three unique with complex and nuanced flavour profiles, flavour mixes reflecting local heritage. which will be available exclusively in hotels, The new flavours were marketed as a restaurants and cafes. premium offering within the mainstream Dobriy brand and sold only in a one-litre size to improve pack mix.

Energy drinks growth Proportion of lights within the sparkling category* (%) (%)

rganic onster merging eveloping stalise CC total nergy *Lights here refers to Coke Light, Coke Zero, Coke Life, Sprite Zero and Fanta Zero

40 Coca-Cola HBC 2017 Integrated Annual Report In Ireland we launched Vegified, a vegetable We seek to capture the opportunities in Connected coolers offer opportunities Strategic Report and fruit drink fortified with vitamins which these occasions, with The Coca-Cola for more direct communication with our was offered at an affordable price in Company, through co-ordinated consumers. In 2017, with The Coca-Cola single-serve packs intended to help busy campaigns including television and Company, we launched a new consumer people who are trying to achieve a traditional media, in-store displays, app called WOAH, which stands for ‘Where healthier lifestyle. sampling and social media. only awesome happens’, in eight of our countries. In addition to our focus on organic growth and innovation, we will continue to look Meals and socialising occasions The WOAH app delivers engaging content at bolt-on M&A in the juice and water We prioritise the largest and most valuable from The Coca-Cola Company and helps us categories. Where we find strong local occasions for beverages: meals and to communicate directly to consumers. and regional brands that fit well with our socialising. At-home consumption is the Once downloaded, the WOAH app can footprint, we will seek to add these to largest opportunity across our markets, serve push notifications on promotions Corporate Governance our portfolio. accounting for 54% of the value share from a nearby, digitally connected cooler. within the non-alcoholic ready-to-drink Connectivity also helps us position coolers, market and as such it will always be a priority Satisfying demand: consumption by providing data on door openings and for our business. occasions how coolers are used. In addition, they can To meet consumer demand we need to Away-from-home consumption represents gain our sales force four days of selling time understand what drives someone’s desire an interesting growth opportunity, as it a year. Less than 10% of our 1.4 million for a beverage at different times delivers a higher revenue per case than the coolers are currently digitally connected, throughout the day. average for the Group. We seek to capture but we aim to achieve 100% connectivity away-from-home consumption by focusing by 2022. We segment possible consumption on increasing our sales in hotels, opportunities into occasions. For each restaurants and cafes and offering Long-term success Financial Statements occasion, we aim to provide every single-serve packages which can earn To ensure that our business continues to consumer with the perfect brand in the two to three times the revenue per case deliver what consumers need and want we right package, from the right channel and at of multi-serve packages and beverages prioritise successfully growing our revenues the right price. We call this process bought for future consumption. Occasion, Brand, Pack, Price, Channel, or ahead of volumes and volumes ahead of OBPPC, and it helps us to construct our calories, ensuring product quality and Engaging with consumers digitally business plans on a country and brand level. marketing our products responsibly. In order to remain relevant, we also consider changes in the way consumers Revenue growth management use technology. Digitalisation presents We aim to grow transactions and revenue new opportunities to communicate faster than volume since this will both

with consumers and new information Swiss Statutory Reporting create a more sustainable business and about consumption. improve our profitability. Coca-Cola HBC, in partnership with The Coca-Cola Share of single-serve packs Company, has developed a comprehensive approach to achieve this goal of revenue in volume (%) 22.4% growth management which we call RGM 2.0. RGM 2.0 puts in place a 10-step Growth in Coke Zero in 2017 framework to address consumers, shoppers and customers together. After considerable work in conjunction with external consultants we have now

implemented a set of strategies, specifically Supplementary Information

12 targeted to each market, intended to Number of product reformulations maximise value growth. We are developing or conversion to no-sugar formulas the relevant skills, capabilities and growth planned for 2018 mindset in our teams to ensure this initiative is sustainable. We started this programme in Q3 of 2016 in Nigeria and Russia and in 2017 we expanded it into our other largest markets; we aim to complete ater the full rollout of these initiatives otal within 2018.

Coca-Cola HBC 2017 Integrated Annual Report 41 OUR STRATEGY IN ACTION: CONSUMERS CONTINUED

An example of our ‘One Brand’ strategy at work. This marketing effort presents Coke Regular, Zero and Light under one brand and emphasises the no-sugar options.

In our Emerging segment the likelihood of Further, the number of trade quality issues We comply with The Coca‑Cola Company’s currency depreciation means that we need declined by 58% and business losses from Global Responsible Marketing Policy and are to balance affordability for our consumers trade quality issues were reduced by signatories of the UNESDA commitments. with required price increases to offset 84% in 2017 compared to 2016. Overall This compliance is checked regularly inflation and a weaker local currency. The consumer complaints in 2017 remained at by external third-party auditors contracted flexibility of our business allows us to adjust a low level, standing at 20 per 100 million by UNESDA. pack sizes, list prices and promotions to containers sold. This is, however, higher As part of UNESDA’s school sales serve our consumers in ways that protect than our target of 17. While the number commitment, we do not offer our products the viability of our business. of consumer complaints decreased by 4% for sale in primary schools. In addition, in the Emerging and Developing segments, we will ensure from 2018 onwards that we saw a 7% increase in the Established Product quality and integrity only no- and low-calorie drinks are offered segment, mainly due to elevated social Product quality, safety and integrity are in secondary schools as a complement media activities related to product taste necessary to build consumer trust, maintain to water, which remains the primary and carbonation. market leadership and generate sales drink available for schoolchildren volumes and revenues. Product integrity for The continued low rate of consumer and adolescents. us means offering the highest quality complaints shows that our beverages are of We are not only complying with the letter of beverages that satisfy customers’ and high quality and people trust our products these policies; we strive to follow the spirit consumers’ expectations in every aspect. and brands. Better product quality and food of them as well. Therefore, we do not place In addition to product functionality, quality, safety also contribute to SDG 3: Good advertising in media where the target safety, taste and design, integrity also health and well-being, and SDG 12: audience includes a substantial portion of includes intangibles such as brand equity. Responsible consumption and production. children. This applies to all media including We have zero tolerance for quality and food television shows, print media, websites, safety non-compliance. Responsible marketing social media, movies, SMS/email marketing, Therefore, in 2017 we continued to Marketing our brands responsibly but animation, third-party characters, collaborate with key ingredient and effectively is of great importance to our celebrities/games/contests, branded toys/ packaging suppliers. As a result of this business. Offering a wide range of products merchandise, talent selection, point of sale, product quality culture development and and providing clear and transparent and merchandise items. Moreover, we do governance processes, the freshness of information is at the centre of our approach. not design our marketing communications our soft drinks improved by 12% in 2017 in a way that directly appeals to children compared to 2016. under 12.

42 Coca-Cola HBC 2017 Integrated Annual Report Looking ahead hotel, restaurant and cafe outlets. We Strategic Report Understand In 2018, we will continue to focus on ways will also be continuing with our work on Lifestyles and consumer preferences to shape our portfolio to better satisfy Incubate & Grow which we launched in are changing, and we recognise that existing and emerging consumer 2017 in Milan, Rome, Zurich and Vienna. this is leading consumers to choose preferences. We plan to continue our Incubate & Grow is an initiative created by healthier beverage options and more efforts to reduce the sugar content of our The Coca-Cola Company to nurture new innovative flavours, and to explore sparkling drinks, supported by more than brands in a highly entrepreneurial and new categories. 12 product reformulations or conversions nimble environment. We are proud that to zero-calorie versions. Coca-Cola HBC was chosen for the global pilot for Incubate & Grow within the Evolve We will also be introducing important new Coca-Cola System. The expansion of our product portfolio brands in water, plant-based beverages and

and our approach to packaging and Corporate Governance ready-to-drink tea. We will introduce We are able to proceed with this faster pace distribution reflect emerging glacéau smartwater in eight countries in of new launches with confidence. Coca- consumer trends. 2018, boosting our premium water brand Cola HBC serves as a benchmark across the portfolio. Within plant-based beverages, we global Coca-Cola System in getting new will launch AdeZ in 13 countries. Finally, products to market quickly, with an average Energise FUZE tea is the fastest growing billion-dollar of 19 weeks from business case approval to Our pace of change is gathering speed, brand in the Coca-Cola System, and we product launch. Efficiency in this area is with more new product launches in believe that launching it in our markets in increasingly important as the pace of 2018 than at any other time in our 2018 will enhance our proposition in a product innovation and new product recent history. high-value and high-growth category. launches accelerates and we feel excited Within the adult segment we are excited about the future that this offers the Company and our consumers.

about the launch of Royal Bliss in premium Financial Statements Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 43 OUR STRATEGY IN ACTION: CUSTOMERS

EVOLVING WITH THE CHANGING NEEDS OF OUR CUSTOMERS Changing lifestyles and new technologies are impacting purchasing behaviour and preferences in retail formats, causing significant change in the retail landscape.

Customer preference: customer In addition, 94.2% of customers reported 2017 progress partnership and shared growth that the Company either met or exceeded –– Further improvement in customer their expectations. satisfaction Changing lifestyles and new technologies are impacting purchasing behaviour and The feedback we receive from our –– Embedding of our new route-to- preferences in retail formats, causing customers helps direct priorities for training market initiatives across our five significant change in the retail landscape. and development, indicating where we need largest countries, resulting in an Successfully adapting to these market to improve skills and capabilities. We improvement in both depth and changes, and helping our customers to encourage customers to disclose the detail breadth of coverage seize new opportunities, boosts the of their individual responses so that we can –– Ongoing improvement in in-store resilience and profitability of our business build a specific improvement plan tailored execution and our customers' businesses. With all of to their needs. In Italy in 2017, we managed –– Seizing of e-commerce opportunities our customers, the key objectives remain to get nearly 100% of the customers that by serving new and existing the same: excellent customer service and we engaged with to provide detailed customers online in-store execution, to create joint value for feedback, an improvement from 41% in long-term success. 2016. We believe this increase reflects our responsiveness to feedback and 2018 priorities Creating satisfaction the value customers find in bespoke –– Rolling out our new route-to-market and economic benefit improvement plans. initiatives across all of our countries Winning with customers is one of our six –– Improving our e-commerce Improving product accessibility capabilities core values, and we work hard to build strong customer relationships to create To ensure that customers can best serve –– Continuing the work and investments shared success. We monitor customer consumers, we tailor our customer that make us a responsible supplier satisfaction by commissioning an annual relationships so that we can provide survey of more than 15,000 customers, each customer with the right level of comparing ourselves to other beverage sales force coverage and access to our suppliers including suppliers of beer and distribution networks. dairy products. In 2017, more than half of Due to the dynamism of the retail our customers, 59.8%, said we exceeded environment, outlets open and close their expectations, an increase of 3.3% over time. compared to 2016.

44 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance Financial Statements

We have to assess relevant changes in the Ensuring excellent execution In our experience, using this approach, we retail universe and incorporate these in store have found that for every percentage point appropriately into our route-to-market of improvement in the RED score, our sales Getting the basics right is critical to building solutions. By performing a complete volume increases between 0.25% and 1%. strong relationships with our customers. assessment of the outlet universe, we The data collected for RED is also used by For Coca-Cola HBC, this means that we capture incremental growth opportunities, our business developers to pursue seek to always deliver in full, on time and both horizontally through new outlets and opportunities for growth and they are able accurately invoiced, an internal metric we vertically through improved service to to adjust our in-store operations to improve monitor and call by the acronym DIFOTAI. existing customers. This project is called performance. In 2017 our RED score We track our success in achieving this each the Every Dealer Survey (EDS), and it allows increased by 5.8%, helped by strong Swiss Statutory Reporting day, for each customer, and constantly us to improve by adjusting the structure of performance in Nigeria. A significant work to improve our performance. Our our sales force and ensuring that our percentage of our customer base is overall DIFOTAI score for 2017 was 97.2%, capabilities address the changing needs of included in this data collection and we a small decline from the result achieved in our customers. Our most recent continue to expand coverage, creating a 2016 of 97.9%. assessment of outlets identified a number positive feedback loop for improvement. of specific opportunities which we then To ensure that the right product is invested in in order to improve. One presented in the right location, we track Creating joint value example was the creation of dedicated real-time execution in our customers’ We want to create shared value and help teams exclusively serving hotels, stores and use that data to evaluate and our customers grow their overall beverage restaurants and cafes; another was the improve in-store operations. We use an sales. One way that we do this is by sharing decision to make hunting for new outlets approach called Right Execution Daily,

our expertise to enhance the shopping Supplementary Information a priority and an ongoing project. referred to by the acronym RED, which experience, extending our service to Additionally, during 2017, we successfully measures aspects required for strong customers beyond just sparkling beverages. embedded new initiatives in the routes to execution and awards a score to each With a supermarket chain in Romania, for market in five of our largest countries. In customer, channel and, ultimately, country example, we helped to improve shopping Poland, for example, we expanded the on that basis. These scores reflect our experiences and drive transactions by number of outlets carrying our full portfolio execution level relative to our internal building on the ‘beverage with meals’ from 1,800 to 7,000, while in Russia we put targets, and we use all this data to experience in their in-store restaurant and in place a dedicated team to serve top-end continually improve. outside barbecue area. bars, cafes and restaurants, and in Switzerland we expanded home delivery of our product portfolio.

Coca-Cola HBC 2017 Integrated Annual Report 45 OUR STRATEGY IN ACTION: CUSTOMERS CONTINUED

At the same time, we supported strong As chilled single-serve packs become more Met or exceeded customer execution and product placement within important to meet the needs of busy expectations the store aisles. In another example, we consumers, and help to drive revenue per collaborated with a leading operator of case and profitability, cold drinks equipment petrol station convenience stores, (CDE) is an essential part of our developing a category vision concept for engagement with customers and our 94.2% this channel to offer fast, easy, cold consumer experience. beverage solutions to the busy consumers Exceeded customer expectations At approximately 39%, refrigeration this customer serves. The project started represents a significant part of our carbon with a pilot in Hungary, and we subsequently emissions footprint. A major focus for became a strategic partner for the improvement has been phasing out HFC customer's outlets in six countries. 59.8% refrigerants since 2015. Instead, all new equipment placed in the market is eco- Seizing opportunities friendly. These new coolers use either CO in single‑serve packages or HC (hydrocarbon) as refrigerant agents, The rising trend for smaller and more which have zero global warming potential, frequent shopping trips, and consumer and are also 57% more energy-efficient decisions to reduce sugar content through than conventional coolers. buying smaller packages, has increased the In 2017, we introduced a total of 71,786 importance of chilled availability for eco-coolers across our markets, helping single-serve packs consumed ‘on the go’. our customers save 735.2 million kWh of In Switzerland, we worked with one electricity, and contributing 16% of our total international customer to optimise sales electricity savings, 26% more than in 2016. of chilled single-serve drinks located beside In total, eco-coolers currently account for the customer’s prepared foods by rolling 5% of our 1.4 million units. out open-fronted coolers in two-thirds of At the same time, we continue to optimise their stores. The project successfully our cooler portfolio in order to improve our increased the number of shoppers adding spend and reduce our energy consumption. a non-alcoholic beverage to their shopping Within five years, we have reduced basket. Careful adjustments to store layout the number of cooler types from 33 to 10. can be extremely impactful for customers.

Right Execution Daily (RED) Our people are highly engaged​ An approach to executing in-store (%) with excellence

paning te coverage ase

CCC Ine CCC

FCG norm FCG igperforming norm igperforming CCC commercial ept commercial CCC

Ine FS CocaCola ottlers Ine ottlers CocaCola CocaCola System Ine System CocaCola

CC countries wit R framewor Countries wit numerical coverage

46 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Understand We strive to understand our customers so that we can provide a tailored solution that best suits their needs.

Evolve In a constantly changing retail landscape, we maintain strong customer satisfaction by adapting to challenges and emerging trends. Corporate Governance Energise We help our customers seize new opportunities and we grow with them, creating joint value for long-term success.

In addition, we foster the innovation of Growth in e-commerce We have also developed eRED, a connected coolers, using internet of things The value of e-commerce in our markets measurement system to score execution in technologies to optimise the energy has doubled over the last five years and is online stores. eRED allows us to check that consumption to the actual time of use. In our full portfolio is available and presented expected to double again over the next five, Financial Statements 2018, the ICOOL range of coolers will use a making the e-commerce channel one of with the right quality standards and lower charge of HC refrigerant gas, while our most dynamic. messaging. This system also creates an keeping the energy consumption stable, if improvement plan for each online retailer not lowering it. E-commerce is still a small proportion to drive incremental transactions. of our overall revenue, but we are clear on Improving performance in hotels, its importance for the future, and we are Looking ahead restaurants and cafes working with new and existing customers to capture growth through this channel. In 2018, we expect to make further Our expectation is that sales through progress in rolling out new route-to-market hotels, restaurants and cafes will grow Online shopping has brought us new initiatives, improving our e-commerce faster than our overall sales growth in the customers, including online takeaway food capabilities and continuing to be a strong near term. This reflects the increasing trend businesses. We help them to increase the partner for our customers and a Swiss Statutory Reporting for people to prioritise experiences and is value of each transaction by including a responsible supplier. beverage with every meal. We achieved this supported by the economic recovery in our By the end of 2018, we expect to have markets. To support sales in this channel objective with one online takeaway food business in Poland, for example, by rolled out the newly identified we are intent on sharing best practice within route‑to‑market initiatives in all our Coca-Cola HBC to improve our developing combination meals (a meal and a beverage for a single price point) and countries. We believe that e-commerce performance. Within the Group there are channels will continue to gain momentum countries with excellent performance in improving product displays in online menus. This resulted in volume growth of 60% and building our internal capabilities within the HoReCa channel and in 2017 our sales this channel is ongoing. teams met in Croatia to benefit from the with this online takeaway food business, Croatian team’s expertise and to further with distribution of our full portfolio improve the Group’s performance in increasing by 20%. this channel. We continue to invest to improve our ability Supplementary Information to serve online shoppers, creating the fundamentals to be ready for rapid growth. In 2017, we piloted a platform to manage our commercial digital assets, including information on how to best present our brands in online stores.

Coca-Cola HBC 2017 Integrated Annual Report 47 OUR STRATEGY IN ACTION: EFFICIENCIES

REMAINING FOCUSED ON COST EFFICIENCIES Our focus remains on optimising both infrastructure and processes to support evolving business needs, while achieving efficiencies and ensuring the sustainability of our resources.

To drive profitability, our focus remains on During the same period, we also reduced 2017 progress those areas we can influence: optimisation the number of our warehouses and –– Total cost of supply as percentage of our production and logistics base, distribution centres by 53%. Our capacity of revenue fell below 10%, following our operating cost base and our cash utilisation across the business was 65% logistics initiatives conversion. Careful management of all during peak months in 2017, giving us –– Full integration of Nigeria into our inputs to our business includes natural plenty of room for growth without the need business services organisation resources. Efforts to reduce costs are for additional investment. therefore directly linked to streamlined –– Strong cash generation with increased In Russia, we closed a juice production plant packaging and reduced water and capital expenditure focusing on in St Petersburg, transferring the energy use. revenue-generating assets production capacity to our local production –– Enhanced relationships with suppliers, facility for sparkling drinks and to other emphasising local sourcing and Infrastructure optimisation parts of the country. This change allows for sustainable principles The drive to optimise and develop our better geographic alignment between –– 41% of total packaging recovered infrastructure to manage growth and to production and demand for our juice for recycling produce a broader beverage portfolio products, reducing transport distances in –– Zero waste to landfill in four plants continued in 2017. Strong focus on our vast Russian territory. In addition, we –– Renewable and clean energy managing and modernising cost-efficient temporarily closed five filling lines for juice accounting for 34.1% of all mega-plants that can effectively serve a and three for sparkling drinks, while energy used country or region remains our priority. In retaining the option to resume production addition, we added new capabilities in on these lines as the market recovers. selected sites during 2017 to support the We focused on creating mega-plants in 2018 priorities expansion of our beverage portfolio, Nigeria in 2017, consolidating production particularly for still drinks. –– Ensure fast response of the supply in Asejire, Abuja and Port Harcourt. chain to growing market's needs Since 2008, our optimisation work has Our plant in Ikeja, which is the largest –– Strong cash generation resulted in a 31% reduction in the number Coca-Cola bottling plant in Africa, was –– Further exploit digital solutions of plants across the Group, from 80 to 55 at also further modernised. and systems the end of 2017. In the process, the average –– Increase the use of recycled PET number of filling lines per plant has in our packaging increased from 3.6 to 4.9, creating more efficient and flexible facilities.

48 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance Financial Statements

We have closed 34 distribution centres in Digital solutions provide great opportunities The extension of services from our BSO in the past two years, reducing numbers from for efficiency with high quality standards. In Sofia, Bulgaria to our Nigerian business unit 51 in 2015 to 17 in 2017 and outsourcing 2017, we implemented a real-time quality centralises and standardises the distribution without disrupting our supply monitoring and process control system in management of general accounting, cash chain. Optimisation of production and eight of our manufacturing facilities. collection, credit and dispute management logistics will continue in Nigeria throughout and human resource processes. In nine of our largest and most important 2018, with further closures of less efficient plants, we introduced a line monitoring Serving as a business partner, in 2017 the facilities in due course. solution to collect data automatically from BSO streamlined back-office work for the In 2017, our ongoing work on logistics production lines. These investments commercial function, freeing up time for reduced the total cost to supply as a enhance the reliability of our production launching products and serving customers. Swiss Statutory Reporting percentage of revenue to a level below processes and the quality of our products. New digital solutions were introduced, 10%. Our drive to shift from fixed to variable We also developed and piloted a control including travel and expense tools, a costs across the Group continued, tower solution which provides end-to-end self-service supplier portal and an outsourcing logistics activities and visibility of logistics activities. This allows automated accounts payable solution. partnering with suppliers. These initiatives us to monitor deliveries to our customers, While carrying out this transformative work, reduce risk and fixed cost, while improving supporting efficient execution and the BSO is also a part of our efforts to operational efficiency. service quality. achieve service excellence, conducting To support commercial initiatives, we customer workshops on process design upgraded production lines, so that our Business standardisation and delivering soft skills training for manufacturing capabilities reflect our Nigeria was the latest addition to the Coca-Cola HBC employees with customer diverse product portfolio. We made Company-wide business standardisation support responsibilities. The BSO also Supplementary Information investments relevant for the packaging of initiative, which began with a shared serves as a talent pool for our Company, the new FUZE tea brand and for the business services organisation (BSO) with 43 people promoted to country production of plant-based beverages, juice in Bulgaria in 2011 and was followed in late operations and corporate service centre smoothies and juice drinks with PET 2016 by the Russian service centre in roles in 2017. packaging in Nigeria. In Hungary, we Nizhny Novgorod. invested in production capabilities for glacéau smartwater, a new premium lifestyle water brand which we plan to launch in 10 markets in 2018.

Coca-Cola HBC 2017 Integrated Annual Report 49 OUR STRATEGY IN ACTION: EFFICIENCIES CONTINUED

Cash generation Efficient, responsible sourcing Adhering to our SGPs involves, at a Our business is highly cash-generative, To minimise our impacts and drive minimum, complying with applicable producing an average of c.€400 million of performance, we partner with logistics environment and labour laws and core free cash flow per annum. In 2017, we providers and suppliers. Working international conventions. These principles generated €426 million of free cash flow collaboratively, we are better able to also communicate our values, and our by improving our profitability and by meet the expectations of customers and expectations for responsible business maintaining excellent working capital consumers, supporting business growth. practices. We aim to achieve 100% of our discipline – once again achieving a working Local sourcing is the cornerstone of suppliers accepting our SGPs by utilising our capital year-end position of less than our joint value creation initiative with ‘SGP Coverage Triangle’ with three negative €100 million. our suppliers. checkpoints throughout the procure-to- pay process, available on our website. In line with our financial targets, we In 2017, more than 98% of our total spend experienced in 2017 a bigger contribution was local in our countries of operations, or Sustainable sourcing of product ingredients of profits to free cash flow of €82 million, within the European Union, which we regard is particularly important to our long-term and this trend is expected to continue in the as one geographic area for sourcing. Good success. As part of the Coca-Cola System, coming years. This in turn allows for an examples are the local sourcing for all sugar we have a uniform approach to sustainable increase in capital expenditure to help our used in Russia, Poland, Serbia, Ukraine and agriculture, rooted in the principles of business grow. Belarus and for metal cans in Nigeria. Local protecting the environment, upholding sourcing helps us control quality and costs. human and workplace rights and helping to Our medium-term target for capital This practice can be helpful in managing build more sustainable communities. These expenditure is 5.5% to 6.5% of net sales foreign exchange exposure, and reducing principles are included in the SAGPs, which revenue. The majority of this is invested in transportation expenses. It also involves a provide guidance to our suppliers for revenue-generating assets such as significant contribution to the economies of agricultural ingredients. We expect to meet state-of-the-art filling lines and cold drink countries where we conduct business. our target of certifying at least 95% of the equipment. Our net expenditure for 2017 key agricultural ingredients we use against amounted to €378 million, equivalent to Our suppliers are required to uphold the SAGPs by 2020. 5.8% of net sales revenue. Excluding the our high standards regarding human rights, sale of idle assets, capital expenditure was labour practices, environmental impacts, The impact of our supply chain efforts 6.4% of net sales revenue. Given our health and safety, ethics and quality. supports several of the UN’s Sustainable integrated capital expenditure decisions, We have guidelines and tools for supplier Development Goals (SDGs), including SDG and our disciplined approach to allocating selection and governance, including 8: Decent work and economic growth, SDG cash, we continue to believe our medium- Supplier Guiding Principles (SGP), 12: Responsible consumption and term target range is appropriate for Sustainable Agriculture Guiding Principles production, and SDG 13: Climate action. nurturing our future growth, especially in (SAGP) and a pre-assessment process view of evolving market trends. with criteria for supplier selection.

Water use ratio in plants Operational water footprint Energy use ratio in plants (litre/litre of produced beverage) (billion litres) (MJ/litre of produced beverage)

vs vs vs

arget arget arget goal goal goal * In 2017 we verified our methodology for water * In 2017, we slightly changed the energy use ratio footprint and restated 2004, 2015 and 2016. as we identified missing data from CHP thermal energy. 2015 and 2016 were restated. Baseline year (2010) was not affected.

50 Coca-Cola HBC 2017 Integrated Annual Report Smarter procurement Joint growth initiatives Efficient use of resources Strategic Report In 2013, we ran the PLATO (Procurement and benchmarking Our efforts to reduce our use of packaging Lean and Agile Transformation and To increase awareness of sustainability, materials, energy and water continued in Optimisation) project with the objective of engagement with strategic suppliers and 2017. As a leading bottler in the Coca-Cola aggregating the spend managed by the the development of our people, we System, we place a significant amount of procurement function and of achieving introduced new events, workshops and packaging in the marketplace. Packaging synergies across countries, while improving tools in 2017. We piloted three sustainability plays a central role in our business, ensuring the quality of the procurement service. A day events in 2017 with strategic suppliers the quality and safety of our products, but pitstop named PLATO 2.0 was held in 2017, in Zurich, Belgrade and Moscow, which innovative light-weight packaging reduces which focused on efficiency and created an opportunity to share information costs and environmental impact. performance with the participation of about our Company’s corporate social We are taking decisive action to address stakeholders from other functions. Corporate Governance responsibility policy and sustainability the risks and opportunities presented by In order to benefit from the large quantities commitments, share achievements and climate change. In November 2017, our business requires, we consolidate best practices, and begin working together Coca‑Cola HBC was among the first to sign orders for promotional materials and on joint targets and initiatives. the Accounting for Sustainability (A4S) CFO marketing equipment needed across our Consistent with our interest in developing statement of support for the Task Force business. Our cooler supplier, for example, our people and our suppliers, we developed on Climate-related Financial has helped us standardise and harmonise workshops and training sessions for specific Disclosures (‘TCFD’). our cooler portfolio across our markets commodities for packaging, such as PET We have specific 2020 targets, aiming at while stabilising costs through a multi-year plastic and metals used for cans. reducing carbon emissions per litre of contract agreement. The Ecovadis CSR platform, a third-party produced beverage by 50% in our To leverage bargaining power related to our assessment tool, was introduced in 2017 operations and by 25% across our value large volumes, all countries are requested to evaluate corporate social responsibility chain, against a 2010 baseline, and in 2017 Financial Statements to place their orders for promotional performance management systems for we continued to make good progress. Since materials within certain time frames. our suppliers. More than 120 critical 2015, our energy and carbon reduction Volume leverage through this ‘One Hellenic’ suppliers have already been assessed initiatives have resulted in approximately approach produced a 6.6% cost using the platform. €11 million aggregate savings. optimisation for FUZE tea glassware procurement – just one example of how this approach produces benefits. Swiss Statutory Reporting CO2 ratio (scopes 1 and 2) CO2 ratio (scopes 1, 2 and 3) Landfill waste ratio (gCO2/litre of produced beverage) (gCO2/litre of produced beverage) (g/litre of produced beverage)

vs vs vs

Supplementary Information

arget arget arget goal goal goal * Restated 2015 and 2016 figures to include the * Restated 2015 and 2016 figures to include the new plant acquisition. new plant acquisition.

Coca-Cola HBC 2017 Integrated Annual Report 51 OUR STRATEGY IN ACTION: EFFICIENCIES CONTINUED

Progress in packaging and waste Our 2020 target for waste from plants to management landfill was also overachieved in 2017, reaching 0.39g/lpb, compared to a target We have a holistic approach to packaging, of 0.5g/lpb. At the same time, four of our intended to minimise our impact at every plants had zero waste to landfill in 2017. stage of the lifecycle by reducing weight, increasing the use of recyclable materials and increasing the overall recyclability of Energy efficiency packaging. Further, we have been using Climate change brings significant potential renewable (plant-based) materials, as well risks to Coca-Cola HBC, with the potential as improving our post-consumer waste for increased energy costs, carbon taxation, management. reduced access to water and business disruption due to severe weather With our light-weighting initiatives, we conditions. However, it also presents us reduced the main packaging materials used with an opportunity to make our value chain for our beverages, namely PET, aluminium more efficient and sustainable. cans and glass bottles, by 18% in 2017 vs our baseline of 2010. Our efforts to address climate change and its impacts contribute to the UN Our packaging-related targets commit us Sustainable Development Goal on climate to source 20% of the total PET we use from action (SDG 13) and affordable and clean recycled PET or PET from renewable energy (SDG 7). materials by 2020. We are partly behind on this commitment due to the higher cost To seize this opportunity, we were among of these materials in our geographies. the first companies to introduce science- We invested more than €14.9 million in based climate targets. These commit us to packaging optimisation and efficiency. use energy from renewable and clean We used 13,100 tonnes of recycled PET energy sources for at least 40% of the total material and 11,050 tonnes of plant PET energy we use by 2020, and reduce the material, which together with light- total energy Coca-Cola HBC consumes per weighting initiatives helped us to save more litre of produced beverage by 47% than 36,000 tonnes of CO2. We have compared to a 2010 baseline. dedicated teams at a country level who To ensure we meet our targets, we use an work on developing thorough plans for internal carbon price of €25 per metric further weight reduction for each container tonne of CO2 to guide decision-making, size and type, without impacting the quality hold regular reviews to confirm that we of the bottles or product taste. adhere to all our internal standards and Streamlining packaging is, by itself, not external environmental laws and enough. We champion increases in regulations, and have third parties annually recycling and other solutions to packaging audit our environmental management waste, and we want to close the recycling systems and all bottling plant data. loop, converting used packaging into new. We are well placed to achieve our 2020 We support 19 packaging waste targets: during 2017, renewable and clean management schemes across our markets energy (CHP – combined heat and power) and we have a Group-wide policy on accounted for 34.1% of all the energy we post-consumer waste management. used, and we reduced the total amount of We have initiated projects in Russia, Nigeria energy consumed per litre of produced and Ukraine for packaging recovery with beverage by 26.5% compared to the 2010 a target of 20% in each by 2020. In Poland, baseline. Our energy intensity dropped by we have initiated a separate collection 4% in 2017 compared to 2016. Direct system, working with four other companies, carbon emissions also declined by 9.1% to focus on increased collection of PET. during 2017, and indirect emissions from In 2017, 41% of the total packaging we our value chain fell by 3.2%. placed in the market was recovered for recycling, exceeding our 2020 target of 40%.

52 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Understand Maximising our performance requires us to prioritise and focus on those areas where we have the most control: optimising our production and logistics, our operating costs and our cash conversion.

Evolve To support the expansion of our

beverage portfolio, we are using all Corporate Governance resources more efficiently and effectively, while adding new capabilities.

Energise Our long-term growth is nurtured and energised through investments in new technologies which support new product categories and energy efficiency. Financial Statements Swiss Statutory Reporting

Looking ahead Digital solutions supporting efficiency and Based on the positive feedback received, As we enter a year of strong innovation, automation will also continue to be rolled we will extend our sustainability events and we will accelerate our investments in out across the Group. These include pilot workshops in 2018, with supplier events revenue-generating activities and assets. programmes, such as an integrated held in additional countries and new training business planning cloud platform to workshops covering raw materials such as In 2018, we will continue to optimise strengthen collaboration in sales and sugar, juices and other ingredients. We also our production and logistics, make operations and optimise inventories, which expect to assess the corporate social enhancements to our procurement was tested in six countries in 2017. responsibility systems of at least 200 more processes, increase awareness on suppliers using the third-party platform we The outcome from PLATO 2.0 will be the sustainability issues, and continue implemented in 2017. Supplementary Information minimising the use of packaging materials. roadmap for procurement for the coming We will also extend the implementation years. The streamlining of procurement We are committed to reaching our 2020 of our carbon, water and energy- processes, the simplification of guidelines sustainability targets and in 2018 we will saving projects. and the exploitation of digital solutions are critically review them and raise the bar the tools we will put in place to reinforce higher, expanding our time horizon. In addition to the ongoing focus on relationships with our suppliers. Moreover, as part of the Coca-Cola System light-weighting projects for packaging, we are working with The Coca-Cola we will increase the use of recycled PET Company to achieve the goals set out in the content. We are currently working on two ‘World Without Waste’ System platform, joint value creation projects with our PET to collect and recover 100% of primary resin suppliers to develop the technology packaging we place in the market. required to achieve this.

Coca-Cola HBC 2017 Integrated Annual Report 53 OUR STRATEGY IN ACTION: EFFICIENCIES CONTINUED

Reducing our environmental footprint remains a key priority. In 2017, we invested in innovative solutions across our territories to improve energy efficiency.

1. Biogas from waste water 2. New cooling system in converted to steam and used again in treatment plant used in Istra Kostinbrod plant, Bulgaria the plant. This steam can also be used to create chilled water with vapour absorption manufacturing site, Russia We invested €310,000 in a new cooling chillers (‘VAC’). After a €35,000 investment, the Istra plant system in our manufacturing site in in Russia now burns biogas taken from its Kostinbrod, Bulgaria. We introduced chillers waste water treatment process, rather than with direct evaporation/heat exchange in 4. Water, energy and CO2 natural gas. Through this, we expect savings the water tanks and now use water instead emissions reduction, Switzerland of 181,000 Nm3 of natural gas each year, of mono propylene glycol. This has We are working with the Swiss start-up and 540 tonnes of CO2. This is the first contributed not only to chemical reduction company Climeworks, which has developed renewable energy of its kind to be used in and a safer environment, but also to a process for capturing CO2 from air with our Russian operations. The concept was 530 MWh of energy savings annually. the world’s first commercial carbon removal deployed in our Novosibirsk plant and in technology. The CO2 produced by 2018 we will implement it in the Oricola 3. Waste heat recovery boilers, Climeworks causes 66% fewer CO2 plant in Italy. Nigeria emissions than traditionally produced CO2. This technology demonstrates our A €1.4 million investment in waste heat commitment to sustainability and local recovery boilers in our Nigerian sites is sourcing. The CO2 will be used for expected to save over 400 tonnes of carbonation of our mineral water Valser carbon emissions each year. The waste Classic in 2018. heat coming from our generators is

1. Russia 2. Bulgaria 4. Switzerland 181,000 Nm3 530 MWh 66% of natural gas saved annually of energy savings annually fewer CO2 emissions

3. Nigeria 400 tonnes of carbon emissions saved each year

54 Coca-Cola HBC 2017 Integrated Annual Report UNDERSTANDING OUR RISKS Strategic Report TO CREATE AND HARNESS OPPORTUNITIES Corporate Governance Understanding and proactively managing our material issues and principal risks is vital. This is because they have the greatest potential to impact our ability to create and sustain value, which can influence our ability to remain viable over time. Financial Statements

Due to their critical importance, our material issues and One is the risk management lens, which provides insight into future principal risks are integrated into our business planning processes threats and uncertainty, and opportunities for seizing advantage. and monitored on a regular basis by our Operating Committee The other is the material issues lens, which provides a filter for and our Board. They offer two complementary lenses for viewing prioritising those environmental, social, economic and financial our future course. issues that are critically important to our ability to create value for all of our stakeholders. In this section, we outline how our material issues and principal risks are identified, managed and reported. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 55 RISK AND MATERIALITY CONTINUED

OUR APPROACH TO MATERIALITY

Our material issues are those that matter most to our stakeholders and contribute to our business success. Assessing their importance provides a guide to strategically managing the risks and opportunities they represent.

For these reasons, we undertake an Engaging stakeholders Attendees included 25 high-level annual materiality assessment process. We engage with our stakeholders to listen academics, suppliers, customers and NGO This involves looking beyond our own and to understand their insights into the representatives, and discussions centred footprint and considering all of the issues that matter most to our on the two material issues we presented: environmental, social, economic and communities and our business. This health and nutrition and employee financial topics that could affect – engagement enables our leadership to engagement and well-being. negatively or positively – our ability to understand emerging trends and different Beyond this, we ask more than 460 key create value over the short, medium perspectives, strengthens our relationships stakeholders to provide online feedback and long term. and helps us make better business every year via our material issues survey. To support our annual materiality decisions to deliver on our commitments. This gives them the opportunity to prioritise assessment, we conduct ongoing dialogue Our key internal and external stakeholders our material issues based on their own with our stakeholders, including suppliers, include investors, employees, customers, interests and perception of the value consumers, regulators and non- suppliers, local communities, NGOs and we create. governmental organisations (NGOs). governments, among others. The survey includes open-ended questions We also assess material issues based Environmental, social, economic and allowing stakeholders to share feedback on on their relevance to our strategic plans financial issues touch on every aspect of anything we may have missed. A similar and objectives. our business. Engaging with stakeholders is, survey is conducted internally to collect Our internal process for assessing therefore, a cross-functional process that input from our top 300 business leaders, materiality involves the following groups: takes place across all of our markets. This is which includes the senior leadership teams done through co-operation with trade in our 28 countries, as well as the regional –– Our cross-functional Sustainability associations, governments, civil management teams and the Group top Steering Committee assesses the list organisations and alliances, in various management. The output of these surveys of material issues and ensures that our meetings, forums and events. is used to derive our materiality matrix. sustainability approach is fully aligned with our business priorities. Once a year, together with The Coca-Cola In 2017, we continued the standardisation –– The Social Responsibility Committee of Company, we invite a selected group of of materiality assessment and stakeholder the Board of Directors endorses the people to a Group stakeholder forum, engagement at the country level, with prioritised list of issues and the resulting where we present briefs on two to three Russia, Poland and FYROM among the first materiality matrix. material issues and seek input regarding countries to implement this initiative. The these and our other material issues. Our –– The Operating Committee integrates objective is to gauge input from a broad 2017 stakeholder forum took place in our sustainability priorities into our array of stakeholders in a structured way, Vienna in November. business strategy. both at the Group and country level. Local teams use the same standard set of material issues as the Group, and may amend them by adding up to three others which reflect the unique characteristics of their local market, following the endorsement of the local senior leadership. You can read more about our stakeholder engagement processes in the Governance section of this report and on our website.

Engaging with stakeholders in Moscow and Skopje.

56 Coca-Cola HBC 2017 Integrated Annual Report MANAGING OUR MATERIAL ISSUES

We continue to regard the 12 material issues identified below Strategic Report as the most relevant and important to our business, and believe they will remain so.

By combining the importance of these This includes setting and disclosing Our contributions to the specific SDGs issues for stakeholders with the significance targets and metrics to measure progress. below, which we believe are relevant to our of their economic, environmental and Executive compensation is linked to business, are noted in the Communities, social impacts on our business, we derive these targets. Consumers, Customers and Efficiencies the relative materiality of each issue. sections of this report.

We use the Sustainable Development Corporate Governance This is shown in the materiality matrix Goals (SDGs) adopted by the United You can find more details on our graphic below. Nations in 2016 as a framework to guide sustainability performance in the GRI Following the process of prioritising our us in creating value for all stakeholders Content Index: https://coca-colahellenic. material issues, our Operating Committee through the proactive management of our com/en/investors/2017-integrated- ensures that they are proactively managed material issues. annual-report/ within our overall strategic framework. Financial Statements

Materiality matrix Key Economic dimension Environmental dimension Corporate governance, Very high 1 6 Carbon and energy business ethics and anti-corruption Packaging, recycling 7 Direct and indirect and waste management 4 2

economic impacts Swiss Statutory Reporting 7 8 Sustainable sourcing 3 3 Health and nutrition 9 1 9 Water stewardship High 2 Product quality 8 6 4 10 12 11 and integrity Social dimension 5 5 Responsible marketing Community investment

Importance to stakeholders 10 and engagement Employee well-being 11 and engagement

12 Human rights and diversity Supplementary Information Moderate Moderate High Very high

Significance of economic, social and environmental impacts on our business

Coca-Cola HBC 2017 Integrated Annual Report 57 RISK AND MATERIALITY CONTINUED

EFFECTIVE MANAGEMENT OF RISK

Risk management Collaboration is central to the success of Our principal risks Intrinsically linked to materiality is the the risk management programme and Leveraging our robust risk management management of risk. During 2017, to strong partnerships have been forged programme, we are constantly vigilant to support informed risk-taking at all levels, across all business functions which actively uncertainty in our operating environments. we further embedded our enterprise risk support the enterprise risk management In this way, we proactively identify new management programme into our programme. Successful collaborations in opportunities and risks, and understand the Company culture. Informed risk-taking 2017 included: threats to our business viability. allows us to innovate and leverage –– an updated Board-endorsed risk This overview of our most important risks, opportunities for growth across our 28 management policy; which involves an assessment of the countries and forms the foundation of our –– Group statements on strategic direction, likelihood of occurrence and the potential effective risk management strategy. The ethics and values; consequences, does not include all risks enterprise risk management programme is –– clear business strategies, objectives that can ultimately affect the Company. led by the Group Chief Risk Officer (CRO) and principles; There are risks not yet known to us, or who works in close collaboration with the –– an annually reviewed enterprise risk currently believed to be immaterial, that risk owners in specialised functions on management framework that articulates could ultimately have an impact on our specific business risks. the continuous process for the business or financial performance. The Board is ultimately responsible for the identification and evaluation of significant For the current reporting period, we have Group’s risk management and internal risks to the achievement of business made three changes to our principal risk control systems, and for reviewing their objectives; categories. Moving off the list is the risk of effectiveness. The Board has defined the –– programme integration into the business change management. With our major Group’s risk appetite and reviews quarterly planning cycle; business transformation projects involving the Company’s risk exposure to ensure that –– continual monitoring of our internal supply chain and information technology material matters and principal risks facing and external environment for factors effectively implemented, the probability and the Company are managed in alignment that may change our risk profile or impact of this risk was further reduced in with our strategic goals and objectives. create opportunities; 2017 and therefore it is no longer evaluated While oversight responsibility rests with the –– training and awareness programmes as a principal risk. However, the category will Audit and Risk Committee (as described in across all operations and functions continue to be monitored as part of our the Governance section of this report), the focused on embedding a risk strategic risk review processes, which Board is updated on outcomes and all management culture into our DNA and allows for its reclassification if required. significant issues. creating informed risk-taking leaders at all levels, which builds the capability to The people and talent risk has transformed leverage opportunities; and into two separate risks due to the differing mitigations: people attraction and people –– the annual evaluation of the type and engagement. Elevated to a principal risk is amount of Group insurance purchased health and safety. While health and safety from the market while leveraging our was always closely monitored as a strategic captive insurance entity. This is with risk, the elevation to a principal risk reference to the availability of cover and emphases the critical importance of the cost measured against the probability well-being and safety of our employees and magnitude of the associated risks. and contractors, and the safety of others in the workplace. Programme review With respect to the risk ratings, the principal Risk management is the central pillar of our The risk management programme risks of cyber and discriminatory taxes business resilience programme which was is audited annually by the Company’s increased in comparison to 2016 in both disclosed in the 2015 Annual report. The full internal audit department. It measures programme description is available at: likelihood and impact. The foreign currency the programme, its processes and their https://coca-colahellenic.com/en/about-us risk observed a decrease in impact.The application against best practice and risk ratings were influenced by changes the International Accounting Standard. experienced in our operational environment. The Corporate Audit Director makes recommendations to improve the overall risk management programme with the findings submitted to the Audit and Risk Committee.

58 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report A solid framework to manage risk Our enterprise risk management process for the identification, review, management and escalation of both risks and opportunities is based on ISO 31000. In 2017 this process incorporated the following key activities: <

Quarterly reviews –– quarterly risk reviews were undertaken by the markets Opportunities Corporate Governance and corporate functions; and risks –– the CRO and his team facilitated 20 of these sessions with senior leaders; CRO leadership sessions

–– management actions were reviewed quarterly. In May and November, facilitated regional-level reviews including the Regional Directors, their teams and the CRO were conducted. Stakeholder feedback was provided after these sessions, Financial Statements ensuring a cyclic bottom/up, top/down information loop; Management actions reviewed

–– the Group Risk Forum (GRF), which acts as an internal think tank and is headed by the CRO, convened on a six-monthly basis and evaluated risk trends and the risk environment as part of the preparation of our strategic risk register and list of principal risks; The Group Risk Forum Swiss Statutory Reporting

–– the Operating Committee reviewed the findings of the GRF and our risk exposures with the CRO in May and November; and Operating Committee review Supplementary Information –– on a quarterly basis, the CRO briefed the Audit and Risk Feedback Committee on material risks, management actions, and to this process compliance with the UK Corporate Governance Code. Committee process briefings <

Coca-Cola HBC 2017 Integrated Annual Report 59 RISK AND MATERIALITY CONTINUED

OUR PRINCIPAL RISKS

Link to material Principal risks Description Potential impact Key mitigations issues 1. Consumer health Failure to adapt to • Failure to achieve • Focus on product innovation and Health and changing consumer our growth plans expansion to a 24/7 total beverage nutrition health trends and • Damage to our portfolio Responsible address brand and • Expand our range of low- and marketing misconceptions about corporate no-calorie beverages our formulations and reputation • Introduce smaller entry packs Product quality the health impact of • Loss of consumer • Reduce the calorie content of and integrity soft drinks. base products in the portfolio • Clearer labelling on packaging • Promote active lifestyles through consumer engagement programmes focused on health and wellness 2. Foreign currency Foreign exchange • Financial loss • Treasury policy requires the hedging Direct and exposure arises from • Asset impairment of 25% to 80% of rolling 12-month indirect changes in exchange • Limitations on forecasted transactional exposure economic rates, as well as cash repatriation • Hedging beyond 12 months may impacts currency depreciation occur in exceptional cases subject in combination with to approval of the Group CFO capital controls, • Derivative financial instruments are restricts movement of used, where available, to reduce net funds and increases exposure to currency fluctuations the risk of asset impairment. 3. Climate, carbon Failure to meet our • Long-term • Water stewardship programmes Carbon and and water stakeholders’ damage to our that are reducing our water energy expectations in corporate consumption, our footprint and Packaging, making a positive reputation assuring sustainable end-to-end recycling and contribution to the • Less influence in water (from water sourcing, and waste sustainability agenda, shaping the using treated waste water for the management particularly relating to citizenship and benefit of our communities, other climate change, sustainability users and stakeholders) Sustainable packaging waste and agenda • Carbon and energy management sourcing water usage. • Reduced programmes profitability • Packaging waste management Water programmes stewardship • Partnering with NGOs and international NGOs on common issues such as nature conservation • Partnering with local communities to minimise environmental impact • Focus on sustainable procurement 4. Channel mix A continued increase • Reduced • Continued to increase our presence Direct and in the concentration profitability in the discounter channel during indirect of retailers and 2017 economic independent • Working closely with our customers impacts wholesalers on whom to identify opportunities for joint we depend to value creation distribute our • Right Execution Daily (RED) strategy products. The continues to support our immediate commitment to operational consumption channel excellence, enabling us to respond remains under to changing customer needs across pressure as all channels consumers alter consumption habits.

60 Coca-Cola HBC 2017 Integrated Annual Report Key for principal risks table Increasing ​ Stable ​ Decreasing ​ Strategic Report Link to material Principal risks Description Potential impact Key mitigations issues 5. Declining Challenging and • Eroded consumer • Seeking to offer the right brand, at Direct and consumer demand volatile confidence the right price, in the right package indirect macroeconomic, affecting through the right channel economic security and political spending • Robust security practices and impacts conditions can affect • Inflationary procedures to protect people and Community consumer demand pressures assets investment and and create security • Social unrest • Crisis response and business engagement risks across our • Safety of people continuity strategies diverse mix of and security of markets. assets Corporate Governance 6. Discriminatory Regulations on • Reduction in • Proactively working with Direct and taxes consumer health, profitability governments and regulatory indirect government authorities to ensure that the facts economic misconceptions relating to formulations are clearly impacts relating to understood and that our products formulations and the are not singled out unfairly risk of the targeting of • Shaping the sustainability agenda as our products by it relates to packaging and waste governments and recovery NGOs for • Engaging with stakeholders discriminatory including NGOs and the

taxation and communities in which we operate Financial Statements packaging waste on strategies to protect the recovery. environment and build consumer trust 7. Quality The occurrence of • Damage to brand • Stringent quality processes in place Product quality quality issues, or the and corporate to minimise the occurrence of and integrity contamination of our reputation quality issues products, across our • Loss of consumer • Early warning systems (Consumer diverse total beverage trust Interaction Centres and social portfolio. • Reduction in media monitoring) that enable issue volume and net identification sales revenue • Robust response processes and systems that enable us to quickly Swiss Statutory Reporting and efficiently deal with quality issues, ensuring customers and consumers retain confidence in our products 8. Regulatory Inadvertent non- • Damage to our • Annual ‘tone from the top’ Corporate challenges compliance, by the corporate messaging governance, Company or related reputation • Code of Business Conduct training business ethics third parties, with laws • Significant and awareness and anti- and regulations, that financial penalties • Anti-Bribery Policy and commercial corruption exist across our • Management compliance training Human rights

diverse mix of time diverted to • Internal control assurance Supplementary Information and diversity markets. resolving legal programme with local management issues accountability • Risk-based internal control framework • Whistle-blower hotline • Legal function in constant dialogue with regulators

Coca-Cola HBC 2017 Integrated Annual Report 61 RISK AND MATERIALITY CONTINUED

Link to material Principal risks Description Potential impact Key mitigations issues 9. People attraction Inability to attract and • Failure to achieve • Upgrade our employer value Employee retain sufficient our growth plans proposition and employer brand well-being and numbers of qualified • Develop leaders and people for key engagement and experienced positions internally employees in • Improve leaders’ skills and competitive talent commitment to talent development markets. • Create shared value with the communities in which we work to ensure we are seen and considered as an ethical business with an attractive purpose • Expand employee pool by hiring a more diverse workforce 10. People Inability to ensure • Failure to achieve • Promote operational excellence and Employee engagement ongoing engagement our growth plans remove barriers to performance well-being and and commitment of • Listen to our people to measure engagement our workforce. engagement and address findings • Improve well-being of employees • Improve leaders’ skills so that they can enable, engage and energise employees sustainably • Promote an inclusive environment that allows all employees to realise their full potential 11. Cyber A cyber-attack or data • Financial loss • Monitoring, identifying and Direct and centre failure resulting • Operational addressing cyber threats and indirect in business disruption, disruption suspicious internal computer economic or the loss of personal • Damage to activity impacts data. corporate • Training on information reputation management and the protection of • Non-compliance information with statutory • Disaster recovery testing and data protection enhanced crisis response legislation capabilities

62 Coca-Cola HBC 2017 Integrated Annual Report Key for principal risks table Increasing ​ Stable ​ Decreasing ​ Strategic Report Link to material Principal risks Description Potential impact Key mitigations issues 12. Strategic We rely on our • Termination of • Management focus on effective Direct and stakeholder strategic relationships agreements or day-to-day interaction with our indirect relationships and agreements with unfavourable strategic partners economic The Coca-Cola renewal terms • Working together as effective impacts​ Company. Monster could adversely partners for growth Energy and our affect profitability • Engagement in joint projects and premium spirits business planning with a focus on partners. strategic issues • Participation in ‘top to top’ senior management forums Corporate Governance 13. Health and The risk of health and • Death or injury of • Standardised programmes, policies Employee safety safety issues being employees, and legislation applied locally well-being and ineffectively managed. contractors or • Group oversight by the health and engagement This incorporates the third parties safety team management of • Employee • Health and Safety Board with the third-party providers, engagement and clear purpose to accelerate the particularly fleet and motivation implementation of the health and logistics. safety step-change plan Not linked to viability Financial Statements

Principal risk heat map This heat map illustrates the likelihood and impact of our principal risks. The timeframes for our principal risks are directly linked to our viability statement. Key

High 1 12 1 Consumer health 8 Regulatory challenges 11 10 7 2 Foreign currency 9 People attraction​

4 3 Swiss Statutory Reporting 3 Climate, carbon and water 10 People engagement​ 8 6 2 5 9 4 Channel mix 11 Cyber​ 13 Declining consumer Strategic stakeholder

Impact 5 12 demand relationships​ 6 Discriminatory taxes 13 Health and safety​

7 Quality Supplementary Information Low Low Likelihood High

Coca-Cola HBC 2017 Integrated Annual Report 63 FINANCIAL REVIEW

AN EXCEPTIONAL SET OF RESULTS In 2017, we achieved balanced growth across our business, with a considerable improvement in every line of our income statement, making this an exceptional year in our recent history.

We delivered another year of progress towards our 2020 objectives, and with better momentum. Strong in-market execution, supported by an improving economic environment, resulted in excellent top-line growth and margin expansion in 2017. Here are the highlights: –– good balance of volume and price/mix growth drove net sales revenue up 5.9% on an FX-neutral basis; reported net sales revenue increased by 4.9%; –– FX-neutral revenue per case improved in all segments, up 3.6% overall; –– volume increased by 2.2%, with growth in all segments; –– operating leverage drove a 30 basis-point reduction in comparable operating expenses as a percentage of net sales revenue; –– comparable EBIT margin increased by 120 basis points to 9.5%; and –– comparable EPS increased by 26.9% to €1.233.

Michalis Imellos Chief Financial Officer

64 Coca-Cola HBC 2017 Integrated Annual Report Income statement Key financial information Strategic Report % Volume grew 2.2% in the year, an 2017 2016 change acceleration from the marginal expansion Volume (million unit cases) 2,104​ 2,058 2.2 of 0.1% in the prior year. We saw a good Net sales revenue (€ million) 6,522​ 6,219 4.9 performance from both sparkling drinks (including Energy) and still drinks, which Net sales revenue per unit case (€) 3.10​ 3.02 2.6 grew 2.6% and 1.5% respectively. Volume FX-neutral net sales revenue (€ million) 6,522​ 6,157 5.9 was up 1.1% in the Established segment, up FX-neutral net sales revenue per unit case (€) 3.10​ 2.99 3.6 2.8% in the Developing segment and up Operating profit (EBIT) (€ million) 590​ 506 16.5 2.7% in the Emerging segment. Strong Comparable EBIT (€ million) 621​ 518 20.0 volume delivery from our medium-sized EBIT margin (%) 9.0​ 8.1 90bps markets in the Developing and Emerging Comparable EBIT margin (%) 9.5​ 8.3 120bps Corporate Governance segments has been an important Net profit (€ million) 426​ 344 24.0 component of overall volume growth. Comparable net profit (€ million) 450​ 352 27.7 Net sales revenue improved by 5.9% on an Comparable basic earnings per share (€) 1.233​ 0.972 26.9 FX-neutral basis. Reported revenue grew Percentage changes are calculated on precise numbers. 4.9%, aided by the stronger Russian rouble when compared to the prior year. FX- neutral revenue per case grew in all segments, up 3.6% overall, with positive contributions from price, category and package mix. Cost of goods sold increased by 4.2% in Balance sheet Financial Statements 2017, compared to the prior year, as a 2017 2016 result of volume growth as well as higher ​ € million € million input costs, driven mainly by increases in Assets ​ ​ PET resin while the cost of our other main Total non-current assets 4,345​ 4,504 commodities declined year on year. Total current assets 2,286​ 2,061 Ongoing tight cost management, Total assets 6,630​ 6,565 combined with strong revenue growth, Liabilities ​ ​ delivered a 30 basis-point reduction in Total current liabilities 1,896​ 1,968 comparable operating expenses as a Total non-current liabilities 1,722​ 1,727 percentage of revenue in a year where we Total liabilities 3,618​ 3,695 invested to support our revenue growth Equity ​ ​ Swiss Statutory Reporting management initiatives and increased Owners of the parent 3,007​ 2,866 marketing spend. Non-controlling interests 5​ 5 Comparable operating profit increased by Total equity 3,012​ 2,870 20.0% in 2017, compared to the prior year, Total equity and liabilities 6,630​ 6,565 as benefits from our revenue growth management initiatives including price Figures are rounded. increases, higher sales volume and slightly positive FX impact more than offset higher cost of goods sold and increased operating expenses. Operating profit increased by

16.5% in 2017, compared to the prior year. Supplementary Information

FX-neutral Comparable Comparable EBIT margin revenue growth operating profit improvement 5.9% €621m +120bps

Coca-Cola HBC 2017 Integrated Annual Report 65 FINANCIAL REVIEW CONTINUED

Net finance costs declined by €26 million Balance sheet Financial risk management during 2017, compared to the prior year, Total non-current assets decreased by Given the volatility in currency and mainly driven by the issuance of the €600 €159 million in 2017, mainly due to the commodity markets, proactively managing million bond in March 2016 and the impact of foreign currency translation. Net financial risks was critical throughout the repayment in November 2016 of the 4.25% current assets increased by €296 million year. We experienced certain adverse fixed rate bond, that had resulted in higher in 2017, driven mainly by the cash and currency impacts due to our foreign interest costs in 2016, as well as the lower cash equivalents generated by the Group currency exposures arising from changes in effective interest rate of the new bond. in the year. exchange rates between the euro, the US On a comparable basis, the effective tax dollar and the currencies of our non-euro rate was 24.5% for 2017 and 24.8% for Cash flow countries. In 2017, unusually for our business, we incurred an overall positive 2016. On a reported basis, the effective tax Net cash from operating activities impact of €8 million at operating profit level, rate was fairly stable at 24.5% and 24.9% for increased by 5.3% in 2017 compared mainly due to the stronger Russian rouble, 2017 and 2016 respectively. The Group’s to the prior year, as increased operating which more than offset the impact arising effective tax rate varies depending on the profitability was only partially offset by from other depreciating currencies. mix of taxable profits by territory, the taxes paid. non-deductibility of certain expenses, We actively hedge transaction exposures in Capital expenditure, net of receipts from non-taxable income and other one-off tax each foreign currency with an available the disposal of assets and including principal items across its territories. active hedging market on a rolling repayments of finance lease obligations, 12-month basis. The Nigerian naira Comparable net profit increased by increased by 13.7% in 2017 compared to experienced double-digit depreciation 27.7% and net profit by 24.0% in 2017 the prior year and represented 5.8% of net against the euro in 2017. We mitigated a compared to the prior year, mainly driven sales revenue, up from 5.3% in 2016. by higher operating profitability and lower significant part of the impact of this net finance costs, only partially offset by We generated €426 million of free cash depreciation by pre-buying certain key raw increased taxes. flow, compared to €431 million in 2016, materials at the beginning of the year. On despite increasing capital expenditure. the other hand, the Russian rouble Dividend significantly appreciated versus 2016 Economic value against both euro and US dollar. The In view of the Group's progressive dividend significant appreciation of the Russian Efficient use of capital and higher profits policy and the Board's assessment of rouble, the depreciating Nigerian naira resulted in an increase in return on invested progress against the Group's strategy, the and minor impacts from various other capital (ROIC) from 10.3% in 2016 to 12.4% Board of Directors has proposed a dividend currencies resulted in a €4 million positive in 2017. At the same time, our weighted of €0.54 per share. This is a 22.7% increase transaction impact to our P&L. With an average cost of capital (WACC) fell from from €0.44 per share for 2016. The dividend additional €4 million positive impact from 8.2% in 2016 to 7.8% in 2017, reflecting payment will be subject to, among other translation, the total impact of currencies the improving economic environment things, shareholders’ approval at our Annual on our P&L was €8 million in the year. General Meeting. in a number of our countries in the year. As a result, we continued to grow the We had contracted EU sugar prices at positive economic value generated favourable levels at the end of 2015, which by our operations. proved successful. PET resin prices did increase, as expected, but careful management and certain well-timed Cash flow pre-buys by our procurement team 2017 2016 ensured that we secured better pricing ​ € million € million compared to our plans. Overall, input cost Cash flow from operating activities 804 763 per case on an FX-neutral basis was up by Payments for purchases of property, plant and equipment (410) (348) 3.1% year on year. Proceeds from sales of property, plant and equipment 39​ 36 Our general policy is to retain a minimum Principal repayments of finance lease obligations (7) (20) amount of liquidity reserves in the form of Free cash flow 426 431 cash and cash equivalents on our balance Figures are rounded. sheet while maintaining liquidity potential in the form of an unused committed €500 million revolving credit facility. We invest our excess cash at Group level primarily in short-term time deposits.

66 Coca-Cola HBC 2017 Integrated Annual Report In principle, we do not keep excess cash We endeavour to maintain our presence Strategic Report in any of our countries except for the ones and profile in the international capital Tax contribution by category with various degrees of capital controls. markets and, where possible, to broaden We have a multi-currency zero balance our investor base. We also seek to maintain automated pool structure in place for 15 a well-balanced redemption profile. of our countries. Fund transfer restrictions In early 2016, we issued a €600 million bond, exist in Belarus, Greece, Serbia and Ukraine, repayable in November 2024, at an but these restrictions do not have a effective interest rate of 2.99%. This was material impact on our liquidity, as the utilised mainly in the refinancing of the €600 amount of cash and cash equivalents we million bond maturing in November 2016. hold in these countries is generally retained Our €800 million bond, with June 2020 for capital expenditure, working capital and maturity, is still outstanding. Corporate Governance dividend distribution purposes. Fund transfer restrictions also exist in Nigeria We also have a €500 million syndicated Corporate income ta 42.6 and the tight liquidity in the local foreign revolving credit facility, which was extended itoling ta 1.7 exchange market in 2016 and the start until 24 June 2021. We have never drawn ayroll taes 46.6 of 2017 significantly limited our ability to down on this facility, which can be used for cost 1.3 execute payments in foreign currency general corporate purposes and carries nvironmental taes 0.2 ter taes 7.6 during that period. Foreign currency liquidity a floating interest rate over EURIBOR has improved considerably since the and LIBOR. Taxes we contribute to second quarter of 2017. our communities Looking ahead Coca-Cola HBC commits to a Borrowings Given the improving economic conditions

transparent approach to tax, and will Financial Statements Our medium- to long-term aim is to in our territory, we expect volume to continue paying taxes in the countries maintain a ratio of net debt to comparable continue to grow in all three segments, where value is created, driving a EBITDA in the range of 1.5 to 2.0 times. with the Emerging markets segment consistent tax behaviour across the We ended the year with a ratio of 0.8 times. accelerating, as Russia and Nigeria return Group. Our tax policy is aligned with Our funding strategy in the debt capital to volume growth. business and commercial strategy, and markets involves raising financing through we observe all applicable laws, rules and our wholly owned Dutch financing Our revenue growth management regulations everywhere we operate. subsidiary, Coca-Cola HBC Finance B.V., initiatives, which are designed to grow except in the case of subsidiaries with joint revenue faster than volume, have gained We support the communities in the control, or countries where certain legal momentum and should continue to countries where we operate directly, by or tax restrictions apply. In such cases, enhance the value we get from every case creating wealth, and also indirectly, by we sell. We also intend to continue with

financing at lower levels in the organisation paying taxes. These taxes include: Swiss Statutory Reporting may be considered. pricing actions in markets impacted by corporate income tax calculated on foreign currency depreciation and markets each country’s taxable profit, employer We use our €3 billion Euro Medium Term where deflationary pressures are abating. taxes and social security contributions, Note programme and our €1 billion Euro We expect our plans to continue to net VAT cost and other taxes that are Commercial Paper programme as the improve FX-neutral net sales revenue per reflected as operating expenses. Excise main basis for our financing. case in the year. taxes and taxes borne by employees are On the cost side, we expect our input costs not included. Borrowing structure (€ million) per case to increase by low single digits on an FX-neutral basis and further reduction in operating expenses as a percentage of net sales revenue in the year. Supplementary Information In summary, we have started the year excited about our plans for product innovation and the work we are doing in route to market and in-store execution. We expect the combination of volume growth, price/mix improvement and cost control to deliver FX-neutral revenue growth and margin expansion in the year.

ons issue 1,394 Commercial paper 120 Finance leases 74 ter 39

Coca-Cola HBC 2017 Integrated Annual Report 67 MARKET HIGHLIGHTS

BROAD-BASED GROWTH IN OUR DIVERSE GEOGRAPHIES​

Established markets “We are focusing on innovation and value in Volume vs 2016 the Established markets segment, with a number of initiatives supporting Lights and Adult drinks. Therefore seeing Coca-Cola +1.1% Zero up by 14% and Schweppes up by 10% in this segment is very encouraging.” FX-neutral net sales revenue per case vs 2016 +0.7%

Sotiris Yannopoulos Region Director

Developing markets “Developing markets grew very well in the Volume vs 2016 year, showing an acceleration in the second half, mainly due to a better volume performance in Poland. Hungary and the +2.8% Czech Republic grew faster compared to 2016, helped by their favourable economies FX-neutral net sales revenue per and good summer weather.” case vs 2016 +2.7%

Keith Sanders Region Director

Emerging markets “We are pleased to see good momentum Volume vs 2016 in our medium-sized Emerging segment countries, while Nigeria and Russia produced flattish results in a challenging +2.7% operating environment. FX-neutral net sales revenue per “With slightly favourable currency rates in case vs 2016 the year, the profitability of the segment improved, delivering 300 basis points of comparable operating margin expansion.” +6.9%

Naya Kalogeraki Group Chief Customer and Commercial Officer

68 Coca-Cola HBC 2017 Integrated Annual Report We achieved broad-based revenue growth in all of our segments with a good balance between volume and price/mix growth, despite facing a challenging operating environment in Nigeria and Russia. Strategic Report ​ 2017 2016 % change Volume breakdown by country Volume (million unit cases) 613​ 607 1.1% Italy 42 Net sales revenue (€ million) 2,436​ 2,408 1.2% Greece 17 Operating profit (EBIT) (€ million) 238​ 237 0.6% ustria 14 Switerlan 12 Comparable EBIT (€ million) 250​ 242 3.3% Irelan 12 Total taxes1 (€ million) 130​ 121 7.6% Cyprus 3 Population2 (million) 91.2 90.9 0.3% GDP per capita (US$) 37,854 36,565 3.5% Bottling plants (number) 13​ 13 – Employees (number) 6,530​ 6,744 -3%

Water footprint (billion litres) 5.0​ 5.5* -9.4% Corporate Governance Carbon emissions (tonnes) 99,812​ 114,329 -12.7% Safety rate (lost time accidents >1 day per 100 employees) 0.93​ 0.94 -0.7% 1. Total taxes include corporate income tax, withholding tax, and deferred tax, as well as social security costs and other taxes that are reflected as operating expenses; as per IFRS accounts. 2. Population source: International Monetary Fund, World Economic Outlook Database, October 2017. Northern Ireland: NISRA (Northern Ireland Statistics and Research Agency), Office for National Statistics, UK, Northern Ireland Economic Outlook, 2017. Italian data: Sicilian population excluded based on data from ISTAT (Italian National Institute of Statistics).

​ 2017 2016 % change Volume breakdown by country Volume (million unit cases) 394​ 383 2.8% olan 43

Net sales revenue (€ million) 1,173​ 1,094 7.2% ungary 23 Financial Statements Operating profit (EBIT) (€ million) 92​ 93 -1.4% Cec Repulic 13 altics 7 Comparable EBIT (€ million) 92​ 97 -4.9% Croatia 7 Total taxes1 (€ million) 54​ 54 – Slovaia 5 Population2 (million) 76.1 76.2 -0.1% Slovenia 2 GDP per capita (US$) 15,117 14,020 7.8% Bottling plants (number) 8 8 – Employees (number) 4,747​ 4,980 -5% Water footprint (billion litres) 2.6​ 2.5* 1.9% Carbon emissions (tonnes) 78,630​ 84,498 -12.1% Safety rate (lost time accidents >1 day per 100 employees) 0.36​ 0.66 -46% Swiss Statutory Reporting 1. Total taxes include corporate income tax, withholding tax, and deferred tax, as well as social security costs and other taxes that are reflected as operating expenses; as per IFRS accounts. 2. Population source: International Monetary Fund, World Economic Outlook Database, October 2017.

​ 2017 2016 % change Volume breakdown by country Volume (million unit cases) 1,097​ 1,068 2.7% Russian Feeration 31 Net sales revenue (€ million) 2,912​ 2,717 7.2% igeria 23 Operating profit (EBIT) (€ million) 260 177 47.2% Romania 16 Seria an ontenegro 9 Comparable EBIT (€ million) 278​ 178 56.3% raine 9 Total taxes1 (€ million) 129​ 106 20.9% ulgaria 5 2 elarus 3 Population (million) 432.6 427.8 1.1% Supplementary Information osnia an eregovina 2 GDP per capita (US$) 5,502 5,055 8.8% rmenia 1 Bottling plants (number) 34​ 35 -3% olova 1 Employees (number) 18,150​ 19,359 -6% Water footprint (billion litres) 10.2​ 10.1* 1.2% Carbon emissions (tonnes) 368,144​ 383,604 -4% Safety rate (lost time accidents >1 day per 100 employees) 0.26​ 0.24 10.1% 1. Total taxes include corporate income tax, withholding tax and deferred tax, as well as social security costs and other taxes that are reflected as operating expenses; as per IFRS accounts. 2. Population source: International Monetary Fund, World Economic Outlook Database, October 2017. * In 2017 we verified our methodology for water footprint, restating 2016. Figures are rounded. Percentage changes are calculated on precise numbers. Coca-Cola HBC 2017 Integrated Annual Report 69 VIABILITY STATEMENT

Business model and prospects The Board believes that a viability period of The above scenarios were tested in Our business model and strategy, as five years is the most appropriate as it aligns isolation as well as in combination and our outlined on pages 18-21 of this report, with the Group’s strategic business stress testing showed that due to the constitute the key factors underpinning the planning cycle and is also consistent with stable cash generation of our business, the understanding and evaluation of our the potential impact of principal risks as Group would be able to withstand the prospects, which are our: disclosed on pages 58-63, the Group’s debt impact of these scenarios occurring over profile and our impairment review process, the period of the financial forecasts by –– strong sales and execution capabilities; where goodwill and indefinite‑lived making adjustments, if required, to its –– attractive geographic diversity; intangible assets are tested based on operating plans within the normal course of –– market leadership; five‑year forecasts. business. Following the above, as well as –– global brands; and carrying out a robust assessment of the Group’s risks that could threaten our –– diverse beverage portfolio. Assessment of viability business model, future performance, From a qualitative perspective, we analysed Our strategy is being adapted over time in solvency or liquidity, the Board has the output of the enterprise risk order to sustainably create value for our concluded that the Group is well positioned management, business planning and shareholders, suppliers, employees, and the to effectively manage its financial, liquidity management internal processes, to customers and communities we serve. The operational and strategic risks. ensure that the risks to the Group’s viability Group’s business model has proven to be are understood and managed. The Board effective and resilient even during the has concluded that the Group’s processes Viability Statement recent challenging market conditions. Our continue to provide a comprehensive Based on our assessment of prospects and Board has historically applied a prudent framework that effectively supports the viability as outlined above, the Directors approach to the Group’s decisions relating operational and strategic objectives of the confirm that they have a reasonable to major projects and investments. From Group and provides a robust basis for expectation that the Group will be able to 2013 to 2017, we generated free cash flow assessment and confirmation of the continue operating and meet its liabilities as of an average of €403 million per year. The Company’s ability to continue in operation they fall due over the five-year period Board considers that our diverse and meet its obligations as they fall due ending 31 December 2022. geographic footprint, including exposure to over the period of assessment. Supporting emerging markets with low per capita the qualitative assessment was a consumption, and our proven strategy in quantitative analysis performed through combination with our leading market the strategic business plan including, but position, offer significant opportunities for not limited to, the Group’s ability to future growth. generate cash. We have continued to stress test the plan against several severe The business planning process, but plausible downside scenarios linked to key assumptions and viability certain principal risks as follows: period Scenario 1: the impact of changes to The Group has a well-established strategic foreign exchange rates was considered, business planning process which has particularly the depreciation of key formed the basis of the Board’s quantitative currencies – principal risk: foreign exchange assessment of the Group’s viability. The business plan reflects our current strategy Scenario 2: lower estimates for sales over a five-year rolling period. The financial volumes were assessed – principal risk: projections included in the plan are based declining consumer demand on the following key assumptions: Scenario 3: lower estimates for sales –– key macroeconomic data, that could revenue for reasons other than volume impact our consumers’ disposable decline are considered – principal risk: income and consequently our sales channel mix volume and revenues; Scenario 4: the impact of higher raw –– key raw material costs; material costs was also considered. –– foreign currency rates; –– spending for production overheads and operating expenses; –– working capital levels; and –– capital expenditure.

70 Coca-Cola HBC 2017 Integrated Annual Report GOVERNANCE Strategic Report Corporate Governance Financial Statements Swiss Statutory Reporting Supplementary Information Contents

Corporate Governance 72 Board of Directors 76 Corporate Governance Report 104 Directors’ Remuneration Report 126 Statement of Directors’ Responsibilities

Coca-Cola HBC 2017 Integrated Annual Report 71 BOARD OF DIRECTORS

UNRIVALLED EXPERIENCE IN OUR LEADERSHIP TEAM

N R

Ahmet C. Bozer Non-Executive Director

Charlotte J. Boyle Appointment: Ahmet Bozer was appointed to Independent non-Executive Director the Board of Directors of Coca-Cola HBC on 21 June 2016. Appointment: Charlotte Boyle was appointed to the Board of Directors of Coca-Cola HBC on 20 Skills and experience: Ahmet Bozer retired from June 2017. the position of Executive Vice President of The Coca-Cola Company in March 2016. Ahmet Skills and experience: Charlotte Boyle joined Bozer started his professional career in 1985 at Anastassis G. David The Zygos Partnership, an international executive Non-Executive Chairman Coopers & Lybrand, based in Atlanta, serving in a search and board advisory firm, as a consultant in variety of audit, consultancy and management 2003 and was subsequently appointed associate Appointment: Anastassis David was appointed roles and moved to The Coca-Cola Company in partner in 2006 and partner in 2008. After 14 Chairman of the Board of Directors of Coca-Cola 1990 as Financial Controls Manager. Four years years with the firm, she retired from her position HBC on 27 January 2016. He joined the Board of later, he assumed a leadership role at Coca-Cola in July 2017. Prior to that, Charlotte Boyle worked Coca-Cola HBC as a non-Executive Director in Bottlers of Turkey (now Coca-Cola Içecek), at Goldman Sachs International between 2000 2006 and was appointed Vice Chairman in 2014. becoming its Managing Director in 1998. He and 2003. Between 1996 and 1999 Charlotte returned to The Coca-Cola Company in 2000 as Skills and experience: Anastassis David brings Boyle was a consultant at Egon Zehnder Division President, Eurasia, and quickly to his role more than 20 years’ experience as an International, an international executive search progressed to the role of Division President, investor and non-executive director in the and management assessment firm. Charlotte Eurasia and the Middle East. In 2007, he became beverage industry. Anastassis David is also a Boyle obtained an MBA from the London Group President, Eurasia, assuming additional former Chairman of Navios Corporation. He holds Business School and an MA from Oxford responsibility for the India and South West Asia a BA in History from Tufts University. University and was a Bahrain British Division, and was subsequently named Group Foundation Scholar. President and Chief Operating Officer, Eurasia External appointments: Anastassis David is and Africa Group. As President of Coca-Cola active in the international community and serves External appointments: Charlotte Boyle serves International, he had responsibility for operations on the International Board of Advisors of Tufts as a member of the board and as chair of the in more than 200 countries and territories. University. He serves as a member of the board finance committee of Alfanar, the first venture Ahmet Bozer earned a Bachelor’s degree in of directors of Aegean Airlines S.A. and AXA philanthropy organisation focused on the Arab Management from the Middle East Technical Insurance S.A. Anastassis David is a member world. She also serves as an independent University, Ankara, Turkey, and a Master’s degree of the Board of Trustees of College Year in non-executive director of Capital and Counties in Business Information Systems from Georgia Athens, Vice Chairman of the Cyprus Union Properties plc. State University. of Shipowners and Vice Chairman of the State Health Services Organisation of the Republic External appointments: Ahmet Bozer is an of Cyprus. Advisory Board Member of Swire Beverages, Hong Kong and a Board Member of Hepsi Burada Board committees in Istanbul and the Turkish Philanthropy Foundation in New York. He serves as a Board A&R Audit and Risk Committee page 94 member for the Coca-Cola Foundation and N Nomination Committee page 98 The Coca-Cola Turkey Life Plus Foundation, is on the Board of Advisors for Robinson College SR Social Responsibility Committee page 102 of Business at Georgia State University, and is R Remuneration Committee page 104 a former member of The Turkish Educational Committee Chair Volunteers Foundation.

Note: Zoran Bogdanovic will be nominated as an Executive Director on the Board of Directors at the Company’s next Annual General Meeting. He was appointed as the new Chief Executive Officer on 7 December 2017 following Dimitris Lois’ death in October 2017. Zoran Bogdanovic’s biography can be found on page 91.

72 Coca-Cola HBC 2017 Integrated Annual Report A&R

A&R

N R Strategic Report

William W. (Bill) Douglas III Independent non-Executive Director

Appointment: Bill Douglas was appointed to

the Board of Directors of Coca-Cola HBC on Corporate Governance 21 June 2016. Olusola (Sola) David-Borha Skills and experience: Bill Douglas is a former Independent non-Executive Director Vice President of Coca-Cola Enterprises, a Reto Francioni position in which he served from July 2004 until Appointment: Sola David-Borha was appointed Senior Independent non-Executive his retirement in June 2016. Bill Douglas has held to the Board of Directors of Coca-Cola HBC in Director various positions within the Coca-Cola System 2015. since 1985. In 1991, he was appointed Division Appointment: Reto Francioni was appointed to Skills and experience: Sola David-Borha was Finance Manager for the Nordic & Northern the Board of Directors of Coca-Cola HBC on 21 Chief Executive Officer of Stanbic IBTC Holdings Eurasia Division of The Coca-Cola Company. Bill June 2016. plc, a full service financial services group with Douglas moved to Atlanta in 1994 as Executive Skills and experience: Reto Francioni has been subsidiaries in commercial banking, investment Assistant to the President of The Coca-Cola Professor of Applied Capital Markets Theory at banking, pension and non-pension asset Company’s Greater Europe Group. In 1996, Bill Financial Statements the University of Basel since 2006 and is the management and stockbroking. Stanbic IBTC Douglas became Nordic Region Manager. In author of several highly respected books on Holdings is listed on the Nigerian Stock Exchange 1998, he was appointed Controller of Coca-Cola capital market issues. From 2005 until 2015, Reto and is a member of Standard Bank group. Sola Beverages plc. From 2000 until 2004, Bill Douglas Francioni was Chief Executive Officer of David-Borha has over 30 years’ experience in served as Chief Financial Officer of Coca‑Cola Deutsche Börse AG and from 2002 until 2005, he financial services and held several senior roles HBC. He joined Coca-Cola Enterprises in 2004 served as Chairman of the Supervisory Board and within the Stanbic Group, including the position of when he was appointed Vice President, Controller President of the SWX Group, which owns the Chief Executive of Stanbic IBTC Bank from May and Principal Accounting Officer. He was Swiss Stock Exchange and has holdings in other 2011 to November 2012. She also served as appointed Senior Vice President and Chief exchanges. Between 2000 and 2002, Reto Deputy Chief Executive Officer of Stanbic IBTC Financial Officer in 2005 and Executive Vice Francioni was Co-Chief Executive Officer and Bank and Head of Investment Banking Coverage President and Chief Financial Officer of Spokesman for the Board of Directors of Consors Africa (excluding South Africa). Sola David-Borha Coca‑Cola Enterprises in 2008. From 2013 to AG. Between 1993 and 2000, he held various holds a first degree in Economics, and obtained 2015, Bill Douglas was the Executive Vice management positions at Deutsche Börse AG, an MBA degree from Manchester Business President, Supply Chain. Before joining the Swiss Statutory Reporting including that of Deputy Chief Executive Officer. School. Her executive education experience Coca‑Cola System, Bill Douglas was associated From 2003 until 2005, Reto Francioni was an includes the Advanced Management Programme with Ernst & Whinney, an international accounting Adjunct Professor of Economics and Finance at of the Harvard Business School and the Global firm. He received his undergraduate degree from Zicklin School of Business, part of the City CEO Programme of CEIBS, Wharton and IESE. the J.M. Tull School of Accounting at the University of Georgia. University of New York. He earned his Doctorate External appointments: Since January 2017, of Law at the University of Zurich. Sola David-Borha is the Chief Executive of the External appointments: : Bill Douglas is the Lead External appointments: Reto Francioni serves Africa Regions (excluding South Africa) for Director and Chairman of the Audit Committee of as a member of the Board of Directors of UBS Standard Bank Group, Africa’s largest bank by SiteOne Landscape Supply, Inc. He is also Group and also as the Chairman of the assets with operations in 20 countries across member of the Board of Directors and Chair of Supervisory Board of Swiss International Airlines. the continent. Sola David-Borha is an Honorary the Audit Committee for The North Highland Fellow of the Chartered Institute of Bankers of company. Finally, Bill Douglas is the Chairman of the Board of the University of Georgia Trustees.

Nigeria (CIBN) and a former Vice Chairman of the Supplementary Information Nigerian Economic Summit Group.

Coca-Cola HBC 2017 Integrated Annual Report 73 BOARD OF DIRECTORS CONTINUED

SR

N R SR

Christo Leventis Non-Executive Director

Appointment: Christo Leventis was appointed to the Board of Directors of Coca-Cola HBC in 2014.

Anastasios I. Leventis Skills and experience: Christo Leventis worked Non-Executive Director as an Investment Analyst with Credit Suisse Asset Management from 1994 to 1999. In 2001, he Appointment: Anastasios Leventis was joined J.P. Morgan Securities as an Equity Alexandra Papalexopoulou appointed to the Board of Directors of Coca-Cola Research Analyst focusing on European beverage Independent non-Executive Director HBC in 2014. companies. From 2003 until March 2014, Christo Appointment: Alexandra Papalexopoulou was Skills and experience: Anastasios Leventis holds Leventis was a member of the Board of Directors of Frigoglass S.A.I.C., a leading global appointed to the Board of Directors of Coca-Cola a BA in Classics from the University of Exeter and HBC in 2015. an MBA from New York University’s Leonard manufacturer of commercial refrigeration Stern School of Business. products for the beverage industry. Christo Skills and experience: Alexandra Leventis holds a BA in Classics from University Papalexopoulou worked previously for the OECD External appointments: Anastasios Leventis is College London and an MBA from the Kellogg and the consultancy firm Booz, Allen & Hamilton, currently employed by Leventis Overseas School of Management in Chicago. in Paris. From 2003 until February 2015 she Limited, a company that imports and exports to served as a member of the board of directors of External appointments: In 2003, Christo West Africa, and is a board member of A.G. Frigoglass S.A.I.C., from 2010 to 2015 she served Leventis (Nigeria) Plc. Anastasios Leventis is also Leventis started the private equity investment arm of Alpheus, a private asset management as a member of the board of directors of National a director of Alpheus Group Limited, a private Bank of Greece and from 2007 to 2009 she asset management company managing assets of company, and he continues to serve as a member of its investment advisory committee. served as a member of the board of directors of private clients and charitable foundations. In Emporiki Bank. Alexandra Papalexopoulou holds a addition, he serves as a trustee of the A.G. BA in Economics and Mathematics from Leventis Foundation, a member of the board of Swarthmore College, USA, and an MBA from overseers of the Gennadius Library in Athens and INSEAD, France. a member of the Campaign board of the University of Exeter. External appointments: Alexandra Papalexopoulou is the Strategic Planning Director at Titan Cement Company S.A., where she has been employed since 1992 and serves as Executive Director since 1995. Alexandra Papalexopoulou is treasurer and a member of the board of directors of the Paul and Alexandra Canellopoulos Foundation, a member of the board of directors of the ALBA College of Business Administration Association and a member of the board of trustees of the American College of Greece.

Board committees A&R Audit and Risk Committee page 94 N Nomination Committee page 98 SR Social Responsibility Committee page 102 R Remuneration Committee page 104 Committee Chair

74 Coca-Cola HBC 2017 Integrated Annual Report SR A&R Strategic Report

Robert Ryan Rudolph Non-Executive Director Corporate Governance

Appointment: Robert Ryan Rudolph was appointed to the Board of Directors of Coca‑Cola José Octavio Reyes HBC on 21 June 2016. John P. Sechi Non-Executive Director Skills and experience: From 1993 until 2006, Independent non-Executive Director Robert Ryan Rudolph worked as an attorney at Appointment: José Octavio Reyes was the business law firm Lenz & Staehelin in Zurich. Appointment: John Sechi was appointed to the appointed to the Board of Directors of Coca-Cola Prior to that, Robert Ryan Rudolph worked as a Board of Directors of Coca-Cola HBC in 2014. HBC in 2014. public relations consultant at the public relations Skills and experience: John Sechi started his Skills and experience: José Octavio Reyes is the agency Huber & Partner in Zurich, as marketing career as a financial analyst and audit manager. former Vice Chairman of The Coca-Cola Export assistant and subsequently as manager at In 1985, he joined The Coca-Cola Company as an Corporation, a position in which he served from Winterthur Life Insurance as well as part-time internal auditor. In 1987, John Sechi became the January 2013 until his retirement in March 2014. with D&S, the Institute for Marketing and Finance Director for Coca-Cola Great Britain Financial Statements He was president of the Latin America Group of Communications Research in Zurich. Robert Ryan Limited based in London. The following year, he The Coca-Cola Company from December 2002 Rudolph obtained an LLM from the University of was appointed General Manager of the European to December 2012. Following various managerial Zurich and is admitted to the Zurich bar. Robert Supply Point Group and in 1990 he moved to positions in Mexico, Brazil and in The Coca-Cola Ryan Rudolph also studied at the Faculté des Madrid to join the Iberian Division as Chief Company headquarters in Atlanta, José Octavio Lettres of the University of Geneva as well as the Financial Officer. In 1993, John Sechi was Reyes was named President of the North Latin Ecole Polytechnique in Lausanne. promoted to President of the Central America Division of Coca-Cola in 2002. Prior to External appointments: Robert Ryan Rudolph is Mediterranean Division of The Coca-Cola joining Coca-Cola, José Octavio Reyes spent five an attorney and partner at the Zurich-based law Company, based in Milan, where he was years with Grupo IRSA, a Monsanto Company firm Oesch & Rudolph. In addition, he serves as a responsible for operations in Greece, Cyprus, joint venture. José Octavio Reyes holds a BSc in member of the Foundation Board of the A.G. Malta, Bulgaria, Former Yugoslavia (Croatia, Chemical Engineering from the Universidad Leventis Foundation and as a member of the Serbia, Bosnia, Montenegro, Kosovo and FYROM), Nacional Autónoma de México and an MBA from Albania and Italy. In 1998, he was promoted to

board of various privately held companies. Swiss Statutory Reporting the Instituto Tecnológico de Estudios Superiores President of the German Division, based in de Monterrey. Düsseldorf. John Sechi was Chairman of Globalpraxis, a commercial consulting firm, from External appointments: José Octavio Reyes has 2001 to 2008. From 2007 until 2013, he was been a member of the board of directors of President, Greater Europe of The Campbell Soup MasterCard WorldWide since January 2008 and is Company, and from 2006 to 2011, a non- a member of the board of directors of Papalote executive Board member and Chairman of the Children’s Museum in Mexico City and Fundación Audit Committee of Coca-Cola Içecek. John UNAM. He has been a Director of Coca-Cola Sechi has a BA in Business Management from FEMSA S.A.B. de C.V. since 2016. Ryerson University in Toronto and is a Chartered Accountant (Canada) and a Chartered Professional Accountant.

External appointments: John Sechi is a Supplementary Information non-executive director and advisor to various privately-held companies, and serves as Executive Chairman of Sechi & Sechi Properties Limited.

Coca-Cola HBC 2017 Integrated Annual Report 75 CORPORATE GOVERNANCE REPORT

GOOD GOVERNANCE SITS AT THE HEART OF OUR COMPANY

Letter from the Chairman of the Board Good governance continues to sit at the heart of our Company As a Board, our aim is to ensure the highest standards of corporate governance, accountability and risk management. Our internal policies and procedures, which have been consistently effective since the Group was formed, are properly documented and communicated against the framework applicable to premium listed companies in the UK. The UK Corporate Governance Code sets out the principles of good practice in relation to board leadership and effectiveness, remuneration, accountability and relationships with shareholders. Further information on our compliance with these main principles for the year ended 31 December 2017 can be found in this report as follows:

Main principle Page Leadership 78​ Effectiveness 84​ Accountability 82​ Remuneration 104​ Relations with shareholders 87​

Further details on the corporate governance regime applying to the Company are described in detail on page 89.

Strategy and oversight Anastassis G. David The Board’s principal focus during the year continued to be on the Chairman of the Board execution of our strategic objectives, which are mainly to drive volume growth, focus on value, improve efficiency and invest in the business, as described in detail in the Strategic Report. We were Dear Shareholder also particularly focused on aligning strategically with The Coca- Cola Company in all of our markets and managing the risks related As Chairman, I believe that the Board continues to be highly to the external environment. These include risks associated with effective in performing its role and ensures that we have a strong currency volatility, geopolitical instability and adverse and effective governance system throughout the Group which macroeconomic conditions. Our governance framework is supports high corporate governance standards. With this in mind, designed to ensure appropriate oversight and challenge. on behalf of the Board, I am pleased to introduce our Corporate Governance Report. The Board’s meetings are split between consideration of the longer-term vision and strategy of the Group and operational and We have renewed our Board in the last few years, with seven of the financial updates on the markets where we operate. These updates 12-strong Board having been appointed in the last two years. The provide links and context for the strategic discussions, as well as results of our work this year on strategy, CEO succession and the governance oversight. Meetings take place in Zug, Switzerland, but reinforcement of corporate governance and sustainability also in selected markets across our footprint, in order for the Board commitments is a testament to the effectiveness of the Board as to interact with local management and learn more about their well as the appropriateness of the present skill set. challenges and the way they are operating at a local level. For instance, we held our June 2017 meeting in Belgrade, Serbia, which represents one of our Emerging markets.

76 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Culture and values Board composition and diversity Our strong corporate culture is fundamental to our business We will continue to keep the composition and size of the Board success. The Board plays a critical role in shaping the culture of the under review. We believe that our Board is well balanced and Company by promoting values-based conduct. The Company’s diverse, with the right mix of international skills, experience, culture is defined by our six core values: authenticity, excellence, background, independence and knowledge. learning, caring for our people, performing as one, and winning with The Board is committed to recruiting Directors with diverse customers. These values make for a culture where our people have backgrounds, personalities, skills and experience. We continue to a strong sense of integrity and ownership. make good progress in improving the diversity of the Board and We monitor our progress in integrating our values through various senior management and increased the number of women on the indicators including our Values Index, Employee Engagement Index, Board during 2017. We will continue to attach importance to all diversity indicators, and health and safety indicators. We aspects of diversity in our nomination processes, while at the same Corporate Governance understand the importance of the Board’s role in establishing the time appointing candidates with the credentials that are necessary Company’s ‘tone from the top’ in terms of its culture and values, for the continuing growth of our operations within a highly and our Directors lead by example as ambassadors of our values competitive and specialised industry. Our Board Diversity Policy in order to cascade good behaviour through the organisation. By guides the Board and the Nomination Committee in relation to their focusing on continuous improvement, we model the values approach to diversity in respect of succession planning and the of excellence and learning. selection process for the appointment of new Board members. Further details on our approach to Board diversity are set out Appointments and Board composition on page 100. During 2017, the Nomination Committee reviewed the composition of the Board to ensure it has the appropriate balance of skills, experience, independence and knowledge in order to Financial Statements discharge its duties and responsibilities effectively. As a result of this review, we recommended Charlotte Boyle as a new non‑Executive Director, following the retirement of Antonio D’Amato. Charlotte brings significant skills and experience in the Anastassis G. David areas of people, talent, succession and executive remuneration to Chairman of the Board the Board, Nomination Committee and Remuneration Committee. Our Nomination Committee is devoted to developing strong succession plans for the Board and senior management. The internal appointment of Zoran Bogdanovic as our new CEO, following the untimely death of Dimitris Lois, is a testament to the quality of the work of the Committee. Swiss Statutory Reporting

Board evaluation In line with our commitment to adhere to best corporate governance practices, a Board effectiveness evaluation was conducted in the second half of 2017. We will do this once again in 2018 to build upon the learnings of the 2017 evaluation. Further details are set out in the Nomination Committee Report on page 98. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 77 CORPORATE GOVERNANCE REPORT CONTINUED

Board composition Zoran Bogdanovic will also be nominated as an Executive Director on the Board of Directors at the Company’s next Annual General Membership of the Board Meeting. Zoran Bogdanovic was previously the Company’s Region Director responsible for operations in 12 countries, and has been a On 31 December 2017, our Board comprised 12 Directors: the member of the Operating Committee since 2013. He joined the Chairman, one Senior Independent Director and 10 non-Executive Company in 1996 and has held a number of senior leadership Directors. The biographies of each member of the Board are set positions, including as General Manager of the Company’s out on pages 72 to 75. operations in Croatia, Switzerland and Greece. Zoran Bogdanovic’s At the Annual General Meeting on 20 June 2017, Charlotte Boyle biography can be found on page 91. Further details on the CEO was appointed as a non-Executive Director of the Board, and as a succession are set out in the Nomination Committee Report on member of the Nomination Committee and Remuneration page 98. Committee, following the retirement of Antonio D’Amato. Further The Operating Committee, described on page 90, supports Zoran details on Charlotte Boyle’s appointment are set out in the Bogdanovic in his role as CEO. Nomination Committee Report on page 98. The non-Executive Directors, of whom six are determined by the In September 2017, Dimitris Lois took medical leave of absence Board to be independent, are experienced individuals from a range to undergo treatment for a medical condition. Michalis Imellos of backgrounds, countries and industries. The composition of the (our Chief Financial Officer) served as Acting Chief Executive Board complies with the UK Corporate Governance Code’s Officer from 15 September 2017 to 7 December 2017. On 7 recommendation that at least half of the Board, excluding the December 2017, Zoran Bogdanovic was appointed as the new Chairman, comprise independent Directors. Chief Executive Officer (CEO) following Dimitris Lois’ untimely death on 2 October 2017.

General qualifications required of all Directors

Coca-Cola HBC’s Board Nomination Policy requires that each Director is recognised as a person of the highest integrity and standing, both personally and professionally. Each Director must be ready to devote the time necessary to fulfil his or her responsibilities to the Company according to the terms and conditions of his or her letter of appointment. Each Director should have demonstrable experience, skills, and knowledge which enhance Board effectiveness and will complement those of the other members of the Board to ensure an overall balance of experience, skills, and knowledge on the Board. In addition, each Director must demonstrate familiarity with and respect for good corporate governance practices, sustainability and responsible approaches to social issues. Business characteristics Qualifications, skills and experience Directors Our business is extensive and involves complex financial Experience in finance, investments and accounting transactions in the various jurisdictions where we operate. 12 Our business is truly international with operations in 28 Broad international exposure and emerging countries, at different stages of development, on three and developing markets experience continents. 12 Our business involves the manufacturing, sale and Extensive knowledge of our business and the distribution of the world’s leading non-alcoholic fast-moving consumer goods industry, as well as beverage brands. experience with manufacturing, route to market and customer relationships 8​ Our Board’s responsibilities include the understanding Risk oversight and management expertise and oversight of the key risks we are facing, establishing our risk appetite and ensuring that appropriate policies and procedures are in place to effectively manage and mitigate risks. 6​ Building community trust through the responsible Expertise in sustainability and experience and sustainable management of our business is an in community engagement indispensable part of our culture. 7​ Our business involves compliance with many different Expertise in corporate governance and/or regulatory and corporate governance requirements government relations across a number of countries, as well as relationships with national governments and local authorities. 6​

78 Coca-Cola HBC 2017 Integrated Annual Report Outside appointments The Board firmly believes that Anastassis David embodies the Strategic Report The Articles of Association of the Company (article 36) set out Company’s core values, heritage and culture and that these limits on the maximum number of external appointments that attributes, together with his strong identification with the Company members of our Board and executive management may hold. and its shareholders’ interests, and his deep knowledge and In addition, if a Board member wishes to take up an external experience of the Coca-Cola System, will ensure an effective and appointment he or she must ask our Chairman’s permission to appropriately balanced leadership of the Board and the Company. do so (and the Chairman must consult the Chairman of the Nomination Committee). The Chairman will assess all requests on a Shareholders’ nominees case-by-case basis, including whether the appointment in question As described under the heading ‘Major shareholders’ on page 230, could negatively impact the Company or the performance of the since the main listing of the Company on the Official List of the Director’s duties to the Group. The nature of the appointment and London Stock Exchange in 2013, Kar-Tess Holding, The Coca-Cola the expected time commitment are also assessed to ensure that Company and their respective affiliates have no special rights in Corporate Governance the effectiveness of the Board would not be compromised. relation to the appointment or re-election of nominee Directors, and those Directors of the Company who were originally nominated Details of the external appointments of our non-Executive at the request of The Coca-Cola Company or Kar-Tess Holding will Directors are contained in their respective biographies set out on be required to stand for re-election on an annual basis in the same pages 72 to 75. way as the other Directors. The Nomination Committee is Our Chairman holds positions on the Boards of Aegean Airlines S.A. responsible for identifying and recommending persons for and AXA Insurance S.A. He is a member of the International Board subsequent nomination by the Board for election as Directors by of Advisors at Tufts University. He is a member of the Board of the shareholders on an annual basis. Trustees of College Year in Athens, Vice Chairman of the Cyprus As our Board currently comprises 12 Directors, neither Kar-Tess Union of Shipowners and Vice Chairman of the State Health Holding nor The Coca-Cola Company is in a position to control Services Organisation of the Republic of Cyprus. In this context,

(positively or negatively) decisions of the Board that are subject to Financial Statements the Board considers that fewer than four of the positions held by simple majority approval. However, decisions of the Board that are the Chairman are considered to be significant. subject to the special quorum provisions and supermajority Having considered the scope of the external appointments of the requirements contained in the Articles of Association, in practice, Directors referred to above, our Board is satisfied that they do not require the support of Directors nominated at the request of at compromise the effectiveness of the Board as each Director has least one of either The Coca-Cola Company or Kar-Tess Holding in sufficient time to devote to his or her role on the Board as the order to be approved. In addition, based on their current Board requires. shareholdings, neither Kar-Tess Holding nor The Coca-Cola Company are in a position to control a decision of the shareholders Independence (positively or negatively), except to block a resolution to wind up or dissolve the Company or to amend the supermajority voting Our Board has concluded that Charlotte J. Boyle (appointed on 20 requirements. The latter requires the approval of 80% of

June 2017), Olusola (Sola) David-Borha, William W. (Bill) Douglas III, Swiss Statutory Reporting shareholders where all shareholders are represented and voting. Reto Francioni, Alexandra Papalexopoulou and John P. Sechi are Depending on the attendance levels at Annual General Meetings, deemed to be independent in accordance with the criteria set out in Kar-Tess Holding or The Coca-Cola Company may also be in a the UK Corporate Governance Code, with such individuals being position to control other matters requiring supermajority independent in both character and judgement. Antonio D’Amato shareholder approval. who retired from the Board on 20 June 2017 was also deemed to be independent in accordance with the same criteria. Anastassis G. David, Anastasios I. Leventis, Christo Leventis and Robert Ryan Rudolph were all originally appointed at the request of The other non-Executive Directors, Anastassis G. David Kar-Tess Holding. José Octavio Reyes and Ahmet C. Bozer have (Chairman), Anastasios I. Leventis, Christo Leventis, José Octavio been appointed at the request of The Coca-Cola Company. Reyes, Ahmet C. Bozer and Robert Ryan Rudolph, were appointed at the request of shareholders of the Company: Kar-Tess Holding and The Coca-Cola Company. They are therefore not considered Separation of roles Supplementary Information to be independent as defined by the UK Corporate There is a clear separation of the roles of the Chairman and the Governance Code. Chief Executive Officer. The Chairman is responsible for the operation of the Board and for ensuring that all Directors are Anastassis G. David was appointed as Chairman on 27 January properly informed and consulted on all relevant matters. The 2016. The Board specifically considered Anastassis David’s Chairman is also actively involved in the work of the Nomination qualifications, skills, and experience prior to his appointment. Committee concerning succession planning and the selection of key people. The Chief Executive Officer, Zoran Bogdanovic, is responsible for the day-to-day management and performance of the Company and for the implementation of the strategy approved by the Board.

Coca-Cola HBC 2017 Integrated Annual Report 79 CORPORATE GOVERNANCE REPORT CONTINUED

Key roles and responsibilities

The roles and responsibilities of our Chairman, Chief Executive Officer, Senior Independent Director, non-Executive Directors and Company Secretary are set out in detail in our Organisational Regulations which can be found at http://coca-colahellenic.com/en/ about-us/corporate-governance/corporate-governance-overview/. Their key responsibilities are as follows:

Chairman • promotes a culture of openness and debate; • leads the Board, presides over its meetings and ensures • ensures the highest standards of corporate governance; its effectiveness; • is the main point of contact between the Board • sets the agenda for Board meetings, ensures that and management; adequate time is available for discussion and makes sure • co-ordinates the work of the Board committees with that Board members get timely, accurate and clear committee Chairs; and information; • ensures effective communication with shareholders and stakeholders.

Chief Executive Officer Senior Independent Director • leads the development and execution of our long-term • acts as a sounding board for the Chairman; strategy with a clear view to creating shareholder value; • leads the independent non-Executive Directors on • is responsible for day-to-day management and matters that benefit from an independent review; and implementation of the Board’s direction and policies; • is available to shareholders if they have concerns which • acts as a liaison between the Board and management and have not been resolved through the normal channels communicates with the Board on behalf of management; of communication. and • communicates on behalf of the Group with shareholders, employees, government authorities, other stakeholders and the public.

Company Secretary Non-Executive Directors • ensures good information flows within the Board and The main responsibilities of the non-Executive Directors its committees; are set out in the UK Corporate Governance Code and • facilitates induction and assists with the Board’s include: professional development requirements; • scrutinising the performance of management in meeting • helps the Board and the Chairman to co-ordinate agreed goals and objectives; and fulfil their duties and assignments; and • challenging constructively and helping develop the • advises the Board on governance matters. Group’s strategy; • ensuring the integrity of financial information; • ensuring that executive remuneration is at appropriate levels; and • overseeing succession planning, including the appointment of Executive Directors. The appointment of the non-Executive Directors is for the period from the date of their election until the next Annual General Meeting. The non-Executive Directors are required to stand for re-election on an annual basis. Upon appointment, non-Executive Directors confirm they are able to allocate sufficient time to meet the requirements of the role.

Board committees Our Board has delegated specific tasks to its committees as set out in the Organisational Regulations and reports from these committees are set out in this Corporate Governance Report. Biographies of the Chairmen of the Board committees and the other members of the Board, the Audit and Risk Committee, the Nomination Committee, the Remuneration Committee and the Social Responsibility Committee are set out on pages 72 to 75.

80 Coca-Cola HBC 2017 Integrated Annual Report Governance framework

Board of Directors

Audit and Risk Remuneration Nomination Social Responsibility Committee Committee Committee Committee

Responsibilities Responsibilities Responsibilities Responsibilities

–– providing advice to the Board Reviewing and approving: –– reviewing the size and –– establishing the principles Strategic Report on whether the Annual composition of the Board; governing the Group’s –– the rewards for the Report and Accounts, taken –– identifying candidates and policies on social executives of the Group; as a whole, is fair, balanced nominating new members to responsibility and the and understandable and –– Company-wide remuneration the Board; environment to guide and benefit plans; provides the information –– planning and managing, management’s decisions necessary for shareholders –– all non-cash obligations in consultation with the and actions; to assess our position and greater than €15,000 which Chairman, a Board –– overseeing the development performance; are reportable by employees membership succession and supervision of –– monitoring the quality, as income (except personal plan; procedures and systems to use of company cars and fairness and integrity of the –– ensuring, together with the ensure the achievement of group life or health benefits); financial statements of the Chairman, the operation of the Group’s social Group and reviewing –– general policies governing responsibility and

a satisfactory induction Corporate Governance significant financial reporting the early termination of programme for new environmental goals; issues and judgements employment of the members of the Board and a –– establishing and operating a contained in them; executives of the Group; and satisfactory ongoing training council responsible for –– reviewing the Group’s –– the implementation or and education programme developing and internal financial control and modification of employee for existing members of the implementing policies and anti-fraud systems as well as coverage for any benefit plan Board and its committees strategies to achieve the the Group’s broader resulting in an increased as necessary to deliver Company’s social enterprise risk management annual cost of €5 million on our strategy. The responsibility and and legal and ethical or more. Committee will also oversee environmental goals and compliance programmes an externally facilitated ensuring Group-wide (including computerised self-assessment process; capabilities to execute such information system controls –– setting the criteria for, and policies and strategies;

and security) with the input overseeing, the annual –– ensuring the necessary and Financial Statements of the external auditors and assessment of the appropriate transparency the internal audit performance and and openness in the Group’s department; effectiveness of each business conduct in pursuit –– reviewing and evaluating the member of the Board and of its social responsibility and Group’s major areas of each Board committee; environmental goals; financial risk and the steps –– conducting an annual –– ensuring and overseeing the taken to monitor and control assessment of the Group’s interactions with such risk, as well as performance and stakeholders in relation to its guidelines and policies effectiveness of the Board social responsibility and governing risk assessment; and reporting conclusions environmental policies, goals and and recommendations and achievements, including –– monitoring and reviewing the based on the assessment to the level of compliance with external auditors’ the Board; and internationally accepted Swiss Statutory Reporting independence, quality, –– ensuring that each standards; and adequacy and effectiveness, committee of the Board is –– reviewing Group policies on taking into consideration the carrying out a self- environmental issues, requirements of all applicable assessment of its human rights, and other laws in Switzerland and the performance and reporting topics as they relate to social UK, the listing requirements its conclusions and any responsibility. of the London Stock recommendations for Exchange and Athens Stock change to the Board. Exchange, and applicable professional standards.

Operating Committee Supplementary Information The Operating Committee, led by the Chief Executive Officer, meets 12 times each year and is responsible for: –– the day-to-day executive management of the Group and its businesses, including all matters not reserved for the Board or other bodies; –– the development of the Group strategies and implementation of the strategies approved by the Board; –– providing adequate head-office support for each of the Group’s countries; –– the setting of annual targets and approval of annual business plans which form the basis of the Group’s performance management, including a comprehensive programme of strategies and targets agreed between the Country General Managers and the Region Directors; –– working closely with the Country General Managers, as set out in the Group’s operating framework, in order to capture benefits of scale, ensuring appropriate governance and compliance, and managing the performance of the Group; and –– leading the Group’s talent and capability development programmes.

Coca-Cola HBC 2017 Integrated Annual Report 81 CORPORATE GOVERNANCE REPORT CONTINUED

Board and committee attendance in 2017 The following table shows the membership of the Board committees and includes the Directors’ attendance at Board and committee meetings during the period between 1 January and 31 December 2017.

​ ​ Board ​ Audit and Risk1 ​ Remuneration ​ Nomination ​ Social Responsibility Total Total Total Total Total Director Independent Attended meetings ​ Attended meetings ​ Attended meetings ​ Attended meetings ​ Attended meetings Anastassis G. David No 7 7 ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ –​ –​ Dimitris Lois2 No 6 6​ ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ –​ –​ Charlotte J. Boyle3 Yes 4 4 ​ –​ –​ ​ 3​ 3​ ​ 3​ 3​ ​ –​ –​ Ahmet C. Bozer No 7 7 ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ –​ –​ Olusola (Sola) David-Borha4 Yes 7 7 ​ 7 8 ​ –​ –​ ​ –​ –​ ​ –​ –​ William W. (Bill) Douglas III Yes 7 7 ​ 8 8 ​ –​ –​ ​ –​ –​ ​ –​ –​ Antonio D’Amato5 Yes 3 3 ​ –​ –​ ​ 1​ 1​ ​ 1​ 1​ ​ –​ –​ Reto Francioni6 Yes 6 7 ​ –​ –​ ​ 3​ 4​ ​ 3​ 4​ ​ –​ –​ Anastasios I. Leventis No 7 7 ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ 4 4 Christo Leventis No 7 7 ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ –​ –​ Alexandra Papalexopoulou Yes 7 7 ​ –​ –​ ​ 4​ 4​ ​ 4​ 4​ ​ 4 4 José Octavio Reyes7 No 7 7 ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ 3 4 Robert Ryan Rudolph No 7 7 ​ –​ –​ ​ –​ –​ ​ –​ –​ ​ –​ –​ John P. Sechi Yes 7 7 ​ 8 8 ​ – – ​ –​ –​ ​ –​ –​

1. Includes four conference calls. 2. Dimitris Lois was eligible to attend six meetings of the Board held prior to his untimely death on 2 October 2017. 3. Charlotte Boyle was appointed to the Board on 20 June 2017. She was eligible to attend four meetings of the Board, three meetings of the Remuneration Committee and three meetings of the Nomination Committee held after her appointment. 4. Sola David-Borha did not attend one meeting of the Audit and Risk Committee due to a long-standing prior commitment. 5. Antonio D’Amato retired from the Board and Nomination Committee on 20 June 2017. He was eligible to attend three meetings of the Board and one meeting of the Remuneration and Nomination committees held prior to his retirement. 6. Reto Francioni did not attend the meetings in June 2017 due to a prior long-standing commitment. 7. José Octavio Reyes did not attend the Social Responsibility Committee meeting in December 2017 due to a prior long-standing commitment.

Operation of the Board –– setting appropriate risk parameters and monitoring to ensure that effective risk management and internal control processes Board governance of the Company are in place; –– assessing the principal risks to the Company’s business model, The governance process of the Board is set out in our Articles of future performance, solvency and liquidity; Association and the Organisational Regulations. These regulations –– assessing the longer-term viability of the Company; define the role of the Board and its committees, their respective responsibilities and authority, their processes and their relationship –– reviewing and approving periodic financial reports; with management. The Articles and the Organisational Regulations –– performing Board and senior management succession planning; can be found at http://coca-colahellenic.com/en/about-us/ –– setting the Company’s culture, values, and standards and corporate-governance/corporate-governance-overview/. ensuring that its obligations to shareholders are understood and met; Role of the Board –– monitoring the Group’s compliance programmes to ensure Our Board has ultimate responsibility for our long-term success effective corporate governance; and and for delivering sustainable shareholder value. There is a clear –– supervising management. division of responsibilities between the Board and the executive In addition, the Swiss Ordinance against Excessive Compensation responsibility for the running of our business, with certain matters in Listed Companies imposes certain obligations on the Board, specifically reserved for the Board’s decision. including a requirement to prepare a remuneration report pursuant Key tasks of the Board include: to Swiss law. The remuneration report must be made available for inspection, together with the Swiss business report and audit –– providing entrepreneurial leadership within the Company’s report, no later than 20 days prior to the ordinary shareholders’ control and risk management framework; meeting at the offices of the Company. Any shareholder may –– determining the long-term business strategy and objectives of request a copy of these reports when available. the Group and monitoring the implementation of the strategy and the achievement of those objectives; –– reviewing and approving the annual business plan;

82 Coca-Cola HBC 2017 Integrated Annual Report Summary of key Board activities for 2017 and priorities for 2018 Strategic Report Topic 2017 activity 2018 priority Strategy • Reviewed our total beverage portfolio together • Support the acceleration of product and with The Coca-Cola Company (TCCC), including package innovation product, activation and distribution initiatives • continue optimisation of costs and investments, • reviewed our revenue growth management and driving process efficiency while improving route-to-market strategies customer satisfaction • held deep-dive discussions concerning our • continue playing an industry-leading role on digital and e-commerce programmes; and sustainability • reviewed progress against the Company’s • continue ensuring effective alignment 2020 targets with TCCC

Performance • Reviewed business performance, including key • Periodic performance reviews with a focus on Corporate Governance business indicators for talent, engagement, the Company’s key business indicators sales, cost optimisation, profitability and • deep-dive reviews of each of the Company’s sustainability regions • held deep-dive reviews of the Company’s • monitoring of external factors such as largest markets, including Nigeria, Russia, Italy, macroeconomic conditions, FX volatility and Poland and Romania commodities markets • held periodic reviews of macroeconomic indicators, FX volatility and commodities prices Risk management • Risk discussions with the Audit and Risk • Continued review of the principal risks and and internal control Committee four times during the year mitigation programmes reported on pages: 55

• ongoing oversight of regulatory and compliance to 63 Financial Statements risks • periodic reviews of currency and commodities risks • detailed review of cyber-security and risks Operational • Periodic reviews of the Company’s main • Continued review of the Company’s cost operations performance optimisation and investment programmes to • visit by Board members to a Group ensure efficiency improvements and improved manufacturing facility and market visit in customer satisfaction Belgrade, Serbia • monitoring of the effectiveness of the • detailed review and approval of CapEx Company’s acceleration plan for cold drink investments equipment Swiss Statutory Reporting Culture and values • Reviewed the results of the Company’s annual • Continue shaping the culture, values and Employee Engagement, Values and employee engagement of the Company Ambassadorship survey through the Board’s interaction with • discussed talent and capabilities plans management and employees • reviewed the Group’s #YouthEmpowered programme which involved more than 450 employee volunteers and approximately 6,000 young people Succession planning • Reviewed succession planning and bench • Ongoing succession planning work for Board and diversity strength initiatives for managers and senior management positions • developed a succession plan for Antonio Supplementary Information D’Amato and recruited Charlotte Boyle as a new Board member • activated the Board’s succession plan for the CEO and appointed Zoran Bogdanovic as our new CEO

Coca-Cola HBC 2017 Integrated Annual Report 83 CORPORATE GOVERNANCE REPORT CONTINUED

Board effectiveness Information and training Board, committee and Director performance The practices and procedures adopted by our Board ensure that evaluation the Directors are supplied on a timely basis with comprehensive At least annually, on the basis of an assessment conducted by the information on the business development and financial position of Nomination Committee, the Board reviews its own performance as the Company, the form and content of which is expected to enable well as the performance of each of the Board committees. This the Directors to discharge their duties and carry out their review seeks to determine whether the Board and its committees responsibilities. All Directors have access to our General Counsel, function effectively and efficiently. During the year, the Chairman as well as independent professional advice at the expense of the meets with the Directors to receive feedback on the functioning of Company. All Directors have full access to the Chief Executive the Board and its committees, the boardroom dynamics, and the Officer and senior management, as well as the external auditors Group’s strategy. Particular focus is given to areas where a Director and internal audit team. believes the performance of the Board and its committees could be The Board has in place an induction programme for new Directors, improved. A report is prepared for the Board on its effectiveness which was followed this past year by Charlotte Boyle. She met and that of its committees. For the past two years, the evaluation individually with the Chairman, Anastassis David, Operating of the Board’s effectiveness has been facilitated by Lintstock, and Committee members, and other senior executives and received details of the 2017 Lintstock Report are set out on page 85. A orientation training from the relevant senior executives in relation summary of the Board evaluation findings for 2016, the actions to the Group and its corporate governance practices. The induction taken in response to improve Board effectiveness in 2017, the programme also included meetings with representatives of our Board evaluation findings for 2017, and the resulting priorities for sales force, customers and major shareholders, and visits to our 2018 is as follows: production plants. 2016 Board evaluation findings 2017 actions –– Devote more time to –– More time was dedicated to strategy Charlotte Boyle was also appropriately briefed on Coca-Cola HBC’s discussions on discussions and the Board reviewed strategy, financials, operations, risks and procedures in order to strategic issues performance of business against the achieve the necessary insight into our activities. –– Succession planning, Group’s 2020 growth objectives All Directors are given the opportunity to attend training to ensure particularly for top –– Developed a robust succession plan that they are kept up to date on relevant legal, accounting and management for the retirement of one of our Board corporate governance developments. The Directors individually –– Focus on monitoring members attend seminars, forums, conferences and working groups on performance of the –– Activated the contingency plans for an relevant topics. The Nomination Committee reviews our Director Group​ interim CEO and successfully training activities regularly. Finally, as part of the continuing appointed the new CEO from our development of the Directors, the Company Secretary ensures talent pool that our Board is kept up to date with key corporate governance –– Reviewed dedicated presentations on developments. The Board appoints the Company Secretary, who Regional performance acts as secretary to the Board. 2017 Board evaluation findings 2018 priorities Following Dimitris Lois’ untimely death, Zoran Bogdanovic was –– Focus on strategy –– Evolving our total beverage portfolio appointed as the Company’s new Chief Executive Officer (CEO). –– Risk oversight​ in close alignment with TCCC He will also be nominated as an Executive Director at the –– Ongoing monitoring of the Group’s Company’s next Annual General Meeting. Zoran Bogdanovic was –– Focus on CEO principal risks​ a part of the Company‘s internal succession plan for the CEO transition position. The Nomination Committee led a thorough process and The independent Directors meet separately at every regular Board benchmarking exercise for the CEO succession. Further details meeting to discuss a variety of issues, including the effectiveness on the CEO succession are set out in the Nomination Committee of the Board. An evaluation of each Director (other than the Report on page 98. There were no other changes to Board or Chairman) is conducted by the Chairman and the Senior committee membership during 2017. Independent Director. The Senior Independent Director leads the evaluation of the Chairman in conjunction with the non-Executive Directors (taking into account the views of the Chief Executive Officer) and, as a matter of practice, meets with the other independent non-Executive Directors when each Board meeting is held to discuss issues together, without the Chief Executive Officer or other non-Executive Directors present.

84 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report

Lintstock Report In 2017, we once again engaged advisory firm Lintstock to undertake an evaluation of the performance of the Board. Lintstock specialises in Board performance reviews and has no other connection with Coca-Cola HBC.

Process The management of, and atmosphere in, meetings was also The first stage of the review involved Lintstock engaging with considered, as was the quality of the Board packs and the the corporate secretariat to set the context for the evaluation, presentations given by management. and to tailor survey content to the specific circumstances of –– The Board’s agenda, and in particular the balance of time Coca-Cola HBC. All Board members were then requested to between strategic and operational issues, was reviewed, and Corporate Governance complete an online survey on the performance of the Board, its respondents were asked to identify the areas upon which committees, and the Chairman. The anonymity of respondents they felt the Board ought to spend more or less time focusing was ensured throughout the process in order to promote an over the next year. open and frank sharing of views. –– The Board’s oversight of strategy was considered, as was the capacity of the organisation to deliver strategy, and opinions Lintstock subsequently produced a report addressing the on the top strategic issues facing the Company over the next following areas of Board performance: three to five years were sought. –– The appropriateness of the Board’s composition was –– The Board’s focus on risk was assessed, and the reviewed, and respondents were asked to identify any effectiveness with which the Board monitors culture and changes that ought to be made to the profile of the Board. behaviours throughout the organisation was considered. The

–– The Board’s understanding of the views of key stakeholders, Company’s processes for attracting, developing and retaining Financial Statements and of the markets in which the Company operates, was talent were also reviewed. considered, and the extent to which the experience of Board –– The performance of the committees of the Board was members is drawn upon was reviewed. assessed, as was the performance of the Chairman and –– The Board’s engagement with management in providing individual Board members. effective support and constructive challenge was assessed.

As a result of the review, among other things the Board agreed to focus on the CEO transition, continue delivering against the Group’s strategy towards our 2020 targets, and continue focusing on risk oversight. Swiss Statutory Reporting Conflicts of interest Board appointments and succession planning In accordance with the Organisational Regulations, Directors are Our Board has in place plans to ensure the progressive renewal required to arrange their personal and business affairs so as to of the Board and appropriate succession planning for senior avoid a conflict of interest with the Group. management. Each Director must disclose to the Chairman the nature and extent Pursuant to our Articles of Association, the Board consists of of any conflict of interest arising generally or in relation to any a minimum of seven and a maximum of 15 members and the matter to be discussed at a Board meeting, as soon as the Director Directors are elected annually for a term of one year by the becomes aware of its existence. In the event that the Chairman Company’s shareholders. Accordingly, all Directors are subject becomes aware of a Director’s conflict of interest, the Chairman to annual re-election by shareholders in accordance with the UK is required to contact that Director promptly and discuss with him Corporate Governance Code. In case of resignation or death of any or her the nature and extent of such a conflict of interest. Subject member of the Board, the Board may elect a permanent guest, Supplementary Information to exceptional circumstances in which the best interests of the whom the Board will propose for election by the shareholders at the Company dictate otherwise, the Director affected by a conflict next Annual General Meeting. of interest is not permitted to participate in discussions and decision‑making involving the interest at stake.

Coca-Cola HBC 2017 Integrated Annual Report 85 CORPORATE GOVERNANCE REPORT CONTINUED

In accordance with the Organisational Regulations, the Board At the Annual General Meeting on 20 June 2017, Charlotte Boyle proposes for election at the shareholders’ meeting new Directors was appointed as a non-Executive Director, and as a member who have been recommended by the Nomination Committee after of the Nomination Committee and Remuneration Committee, consultation with the Chairman. In making such recommendations, following the retirement of Antonio D’Amato. Following Dimitris the Nomination Committee and the Board must consider criteria Lois’ untimely death, Zoran Bogdanovic was appointed as the including the overall balance of skills, experience, independence and Company’s Chief Executive Officer. He will also be nominated as an knowledge of the Board member, as well as diversity considerations Executive Director at the Company’s next Annual General Meeting. including gender. See the Nomination Committee report on page Zoran Bogdanovic was a part of the Company’s internal succession 98 for further information on the role and work of the Nomination plan for the CEO position. The Nomination Committee led a Committee, including the Board Diversity Policy. Through this thorough process and benchmarking exercise for the CEO process, the Board is satisfied that the Board and its committees succession. Further details on the CEO succession are set out in have the appropriate balance of experience, diversity, the Nomination Committee Report on page 98. There were no independence and knowledge of the Company to enable them to other changes to Board or committee membership during 2017. discharge their duties and responsibilities effectively.

Key investor relations activities in 2017

December February –– Citi Global Consumer Dec Jan –– Investor roadshow in UK conference, London March Nov Feb November –– The Consumer Analyst –– Investor roadshow in UK, Group of Europe conference, USA and Canada London Oct Mar –– Investor roadshow in London September –– Barclays Global Consumer April Staples conference, Boston –– Investor roadshow in the USA and Canada Sept Apr May –– JP Morgan Global Consumer and Retail conference, Aug May London

July June

June –– Deutsche Bank Access Global Consumer conference, Paris –– Annual General Meeting, Zug –– Investor roadshow in London

86 Coca-Cola HBC 2017 Integrated Annual Report Shareholder engagement –– As organisational stakeholders of the Global Reporting Initiative Strategic Report The Chairman, the Senior Independent Director, the Chair of the (GRI), we can share experiences and learn from people from Remuneration Committee and the Chairman of the Audit and Risk other companies and industries. Committee will be available at the Annual General Meeting of the –– We are active members of the Corporate Leadership Group on Company to answer questions from shareholders. The Board Integrated Reporting, shaping the future of integrated reporting encourages shareholders to attend as it provides an opportunity to standards and stakeholder engagement. engage with the Board. –– Our leaders are active members of local business alliances such as business leaders’ forums, local UN Global Compact networks, Pursuant to Swiss law and the Articles of Association, shareholders business councils for sustainable development and other annually elect an independent proxy and we have adopted an industry associations. This work includes participating at electronic proxy voting system for our Annual General Meetings. conferences, working with civil organisations and influencing

The Company has a dedicated investor relations function which public policy related to key sustainability issues such as health Corporate Governance reports to the Chief Financial Officer. Through the investor and well-being, packaging, water and climate, and matters relations team, the Company and Board maintain a dialogue with concerning social sustainability such as labour relations and institutional investors and financial analysts on operational financial talent attraction and retention. performance and strategic direction items. As evident in the –– We work with local communities on sustainable solutions that graphic on page 86, to reflect our commitment to our strong support local and global sustainable development goals, and shareholder base, members of our management and the investor we actively contribute to the Sustainable Development Goals relations team held numerous meetings with investors and (SDGs) adopted by the UN. shareholders during 2017. The feedback from shareholders has –– Through our partnership with The Coca-Cola Company, we have been regularly considered by the Board and where necessary access to consumer insights globally and locally, and we also appropriate action to further engage with shareholders was taken. make sure our partnerships and actions related to sustainable development are in synergy with theirs. Wider stakeholder engagement Financial Statements The Board is regularly updated on wider stakeholder engagement Considering stakeholders in decision-making feedback to stay abreast of stakeholder insights into the issues The Board considers the impact on stakeholders when taking that matter most to them and our business, and to enable the a number of key decisions. Examples of these include: Board to understand and consider these issues in decision-making. Engaging with our stakeholders strengthens our relationships –– Shaping choice – in developing our product portfolio and our and helps us make better business decisions to deliver on marketing efforts, together with The Coca-Cola Company, our commitments. we consider consumer health and nutrition. This means that we are focusing on shaping choice across our portfolio of sparkling Employees are one of our most important stakeholder groups and and still beverages, emphasising on low- or no-sugar variants. the Board therefore closely monitors and reviews the results of the –– Cooler technology – cold drinks equipment (CDE) is an essential

Company’s annual Employee Engagement, Values and part of our engagement with customers and our consumer Swiss Statutory Reporting Ambassadorship surveys as well as a number of other metrics to experience. When investing in cooling technology we carefully ensure alignment of interests. For more information about these weigh up meeting the demands of customers and the surveys, see the People section on page 28. environmental impact of our technology and thus since 2015 The Company also engages extensively with external stakeholders we have been investing in new ‘smart’ cooler technology. through a variety of different channels including our annual Material –– Infrastructure optimisation – during the year we consolidated Issues survey in which 460 stakeholders provide feedback. production and distribution centres in several of our countries We also work, among others, with our customers, consumers, including Russia and Nigeria. In doing so we considered the suppliers, local community representatives and other business impact on the social and economy scales of the local partners across the value chain every day. The infographic on the communities we operate. following page sets out the different channels we use to engage –– Price pack architecture – we considered consumer affordability stakeholders, which in turn is reported on to the Board. in our Emerging segments with weaker local currencies and have Supplementary Information changed our price pack architecture to provide consumers with As part of our engagement programme we also partner with affordable options by adjusting pack sizes, list prices and people, businesses and organisations that share our interest promotions to serve our consumers in ways that also protect in a sustainable future and have a stake in our business. This is the viability of our business. essential for our success. We therefore engage in the following –– Route-to-market solutions – our Every Dealer Survey considers manner: the changing needs of our customers, allowing us to adjust the –– Our business leaders engage with a variety of international structure of our sales force and ensure that our capabilities organisations and business associations such as the UN address these needs through improved service to existing Global Compact and the Union of European Soft Drinks customers. Associations (UNESDA).

Coca-Cola HBC 2017 Integrated Annual Report 87 CORPORATE GOVERNANCE REPORT CONTINUED

How we engage with our stakeholders

Shareholders Annual General Meetings, investor roadshows and results briefings, webcasts, ongoing The Coca-Cola dialogue with analysts Customers and investors Company Regular visits, dedicated Day-to-day interaction as account teams, joint business business partners, joint projects, planning, joint value creation joint business planning, initiatives, customer care functional groups on strategic centres, customer issues, ‘top-to-top’ senior satisfaction surveys management meetings

Communities Plant visits, community Consumers meetings, partnerships on Consumer hotlines, local common issues, sponsorship websites, plant tours, research, activities, lectures surveys, focus groups at universities

Non- Governments Suppliers governmental and and regulatory authorities Joint value creation intergovernmental initiatives, annual supplier Recycling and recovery organisations conference, sustainable initiatives, EU Platform for Action Dialogue, policy work, sourcing, Supplier Guiding on Diet, Physical Activity and partnerships on common issues, Principles, packaging Health, foreign investment membership of business and associations, whistle- advisory councils, chambers industry associations blower hotline of commerce

Every year we ask over 460 stakeholders from the above We also ask for their opinions by providing open-ended questions, groups to provide online feedback via our material issues survey. so they can share with us anything we might have missed or that These surveys give our stakeholders the opportunity to prioritise needs more attention. our material issues based on their own interests and the relevance of these to our business.

88 Coca-Cola HBC 2017 Integrated Annual Report UK Corporate Governance Code Anastassis G. David was originally appointed at the request of Strategic Report As a Swiss corporation listed on the London Stock Exchange (LSE) Kar-Tess Holding and was not, at the time of his appointment as with a secondary listing on the Athens Exchange, we aim to ensure Chairman, independent as defined by the UK Corporate that our corporate governance systems remain in line with Governance Code. In view of Anastassis David’s strong international best practices. Our corporate governance standards identification with the Company and its shareholder interests, and procedures are continuously reviewed in light of current combined with his deep knowledge and experience of the Coca- developments and rulemaking processes in the UK, Switzerland and Cola System, the Board deemed it to be in the best interests of the also the EU. Group and its shareholders for him to be appointed as Chairman, to continue to promote an effective and appropriately balanced As a premium listed company, we are required to comply with the leadership of the Group. In accordance with the established policy provisions of the UK Corporate Governance Code or explain any of appointing all Directors for one year at a time, the Board intends instances of non-compliance to shareholders. Our Board believes to continue to keep all positions under regular review and subject to Corporate Governance that, except as set out in the paragraphs below, the Company is in annual election by shareholders at the Annual General Meeting. compliance with the provisions of the UK Corporate Governance Code and complied with such provisions throughout 2017. Application of governance codes Pursuant to our obligations under the Listing Rules, we intend to continually comply with the provisions of the UK Corporate Other corporate governance codes Governance Code or to explain any instances of non-compliance in There is no mandatory corporate governance code under Swiss law our Annual Report. applicable to us. The main source of law for Swiss governance rules The UK Corporate Governance Code is available online at https:// is the company law contained in articles 620 ff. of the Swiss Code of www.frc.org.uk/Our-Work/Publications/Corporate-Governance/ Obligations, as well as the Ordinance against Excessive UK-Corporate-Governance-Code-April-2016.pdf. Compensation in Listed Companies.

In addition, the UK’s City Code on Takeovers and Mergers (the ‘City Financial Statements Certain differences between the Company’s Code’) does not apply to the Company by operation of law, as the corporate governance practices and the UK Company is not incorporated under English law. The Articles of Corporate Governance Code Association include specific provisions designed to prevent any The Swiss Ordinance against Excessive Compensation in Listed person acquiring shares carrying 30% or more of the voting rights Companies further limits the authority of the Remuneration (taken together with any interest in shares held or acquired by the Committee and the Board to determine compensation. The acquirer or persons acting in concert with the acquirer) except if effective limitations include requiring that the Annual General (subject to certain exceptions) such acquisition would not have Meeting approve the maximum total compensation of each of the been prohibited by the City Code or if such acquisition is made Board and the Operating Committee, requiring that certain through an offer conducted in accordance with the City Code. For compensation elements be authorised in the Articles of further details, please refer to the Company’s Articles of Association and prohibiting certain forms of compensation, such as Association, which are available on our website. severance payments and financial or monetary incentives for the Swiss Statutory Reporting acquisition or disposal of firms. We are in compliance with the requirements of the Swiss Ordinance against Excessive Compensation in Listed Companies and have amended our Articles of Association to that effect. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 89 CORPORATE GOVERNANCE REPORT

THE OPERATING COMMITTEE REPRESENTS THE EXECUTIVE LEADERSHIP OF THE COMPANY.

From left to right

Row one Michalis Imellos, Zoran Bogdanovic, Naya Kalogeraki, Alain Brouhard, Keith Sanders

Row two Marcel Martin, Sotiris Yannopoulos

Row three Jan Gustavsson, Sanda Parezanovic

90 Coca-Cola HBC 2017 Integrated Annual Report Zoran Bogdanovic Alain Brouhard Strategic Report (46) Chief Executive Officer (55) Business Solutions and Systems Director Senior management tenure: Appointed December 2017 (less Senior management tenure: Appointed June 2010 (7 years) than 1 year) Previous Group roles: Region Director responsible for Nigeria, Previous Group roles: Zoran Bogdanovic’s previous roles include: Romania, Moldova, Bulgaria, Serbia and Montenegro (2010 to Member of the Finance Team of Coca Cola HBC Croatia from 1996 2013), and Water and Juice Business Director. to 1998; CFO and then General Manager of Croatian operations Outside interests: No external appointments from 1998 to 2004; Country General Manager of Coca-Cola HBC Croatia from 2004 to 2008; Country General Manager for Coca- Previous relevant experience: Alain Brouhard began his career Cola HBC Switzerland from 2008 to 2011; Country General with Procter & Gamble, where he worked in four different countries Manager for Coca-Cola HBC Greece from 2011 to 2013; and and in a variety of commercial and management roles leading up to Region Director, responsible for operations in 12 countries, and a Global Customer Team Leader in 2000, when he oversaw the global Corporate Governance Member of Coca‑Cola HBC’s Operating Committee since 2013. account management of Delhaize and the European management of new channels, including discounters (such as Aldi, Lidl and Dia) Outside interests: No external appointments and convenience retailing (such as petrol stations). From 2002 to Previous relevant experience: Zoran Bogdanovic started his 2010, Alain Brouhard held positions at Adidas, including managing career as an auditor with Arthur Andersen before joining Coca‑Cola Director, Italy and Southeast Europe, from 2007 until 2010. Prior HBC Croatia in 1996. to that, he was Vice-President for commercial operations, EMEA, from 2002 to 2005, and, from 2005, took the role of Managing Nationality: Croatian Director, Iberia, based in Spain, with responsibility for Spain Michalis Imellos and Portugal. (49) Chief Financial Officer Nationality: French

Senior management tenure: Appointed April 2012 (5 years) Financial Statements Keith Sanders Previous Group roles: Region Finance Director responsible for (57) Region Director: Armenia, Belarus, Estonia, Latvia, Lithuania, Nigeria, Romania, Moldova, Bulgaria, Greece, Cyprus, Serbia and Poland, Russian Federation, Ukraine and Moldova Montenegro; General manager, Romania and Moldova. Senior management tenure: Appointed August 2009 (8 years) Outside interests: No external appointments Previous Group roles: General Manager of the Company’s Previous relevant experience: Michalis Imellos held a number of operations in Russia (2004). finance positions in the UK-based European headquarters of Xerox, Outside interests: No external appointments including those of European Mergers & Acquisitions Director and Finance Director of the Office Europe Division. He managed the Previous relevant experience: Prior to joining the Group, Keith financial, tax and legal aspects of Xerox’s sponsorship of the Athens Sanders spent 11 years within the Coca-Cola System. He started

2004 Olympic Games as well as the finance function of the his career with The Coca-Cola Company in a regional marketing Swiss Statutory Reporting company’s operations in Greece. He is a Fellow of the Institute role within the Gulf Region. In 1993, he was appointed Human of Chartered Accountants in England and Wales, and started his Resources and Training Manager for the Gulf Region. In 1994, he career at Ernst & Young. assumed his first Bottling General Manager role in Bahrain, and then moved through a series of larger country general management Nationality: Greek roles until 2001, when he was appointed Director for Bottling Naya Kalogeraki Operations in the Eurasia & Middle East Division with responsibility (48) Group Chief Customer and Commercial Officer for Saudi Arabia, Pakistan, UAE, Oman, Bahrain and Qatar. Prior to Senior management tenure: Appointed July 2016 (1 year) joining the Coca-Cola System, Keith Sanders spent six years with Procter & Gamble in the United States in a variety of sales and Previous Group roles: Director of Strategy, CEO office. From marketing roles. 1998, when Naya Kalogeraki joined the Company she built her career assuming roles of increased scale and scope including Nationality: American Supplementary Information Marketing Director, Trade Marketing Director, Sales Director and Country Commercial Director, Greece. She has been heavily involved in Group strategic projects and task forces addressing mission-critical business imperatives. In September 2013, Naya Kalogeraki was appointed to the role of General Manager, Greece and Cyprus. Outside interests: No external appointments Previous relevant experience: Naya Kalogeraki joined the Company in 1998 from The Coca‑Cola Company where she held a number of marketing positions up to Marketing Manager. Nationality: Greek Coca-Cola HBC 2017 Integrated Annual Report 91 CORPORATE GOVERNANCE REPORT CONTINUED

Sotiris Yannopoulos Sanda Parezanovic (50) Region Director: Austria, Czech Republic, Hungary, Slovakia, (53) Group Human Resources Director Italy and Switzerland Senior management tenure: Appointed June 2015 (2 years) Senior management tenure: Appointed July 2014 (3 years) Previous Group roles: Sanda Parezanovic’s previous roles in the Previous Group roles: Sotiris Yannopoulos was general manager in Group include: Public Affairs & Communications Manager, Serbia Serbia and Montenegro from 2009 to 2012 and Country General and Montenegro from 2003 to 2006; Country Human Resources Manager in Italy from 2012 to 2014. and Public Affairs & Communications Manager, Serbia and Montenegro from 2006 to 2010; and Region Human Resources Outside interests: No external appointments Director Bosnia & Herzegovina, Bulgaria, Croatia, Cyprus, FYROM, Previous relevant experience: Prior to joining the Group, Sotiris Greece, Northern Ireland, the Republic of Ireland, Moldova, Yannopoulos spent 12 years working at PepsiCo in various roles. He Montenegro, Nigeria, Romania, Serbia and Slovenia from 2010 to also spent five years with Star Foods, where he was the East 2015. Balkans Business Unit Manager, and seven years with Tasty Foods Outside interests: No external appointments in Greece, where his roles included Business Development Director, Marketing and Trade Marketing Director, Marketing Manager and Previous relevant experience: Sanda Parezanovic started in 1989 Group Brand Manager. He started his career as an Assistant as Market Researcher and later Strategic Planner working for Product Manager (USA/South Africa) with Colgate-Palmolive. various local research and marketing agencies in SFR Yugoslavia. Sanda Parezanovic joined Saatchi & Saatchi Balkans in 1994, holding Nationality: Greek various senior management positions in several Balkan countries, Marcel Martin including Managing Director of two start-up agencies, first in (59) Group Supply Chain Director FYROM and later in Serbia. In 1999 she relocated to London, where Senior management tenure: Appointed January 2015 (3 years) she worked for Saatchi & Saatchi and Marketing Drive on a number of pan‑European and business development projects, before she Previous Group roles: Marcel Martin joined the Group in 1993, joined our Group in 2003. holding positions with increasing responsibility in the supply chain and commercial functions. Since 1995, Marcel Martin has held Nationality: Serbian general management assignments in several of our markets, including as General Manager for Eastern Romania, Regional Manager Russia, Country General Manager Ukraine and General Manager Nigeria. Marcel Martin became General Manager of our Irish operations in 2010 and is now our Group Supply Chain Director. Outside interests: No external appointments Nationality: Romanian Jan Gustavsson (52) General Counsel, Company Secretary and Director of Strategic Development Senior management tenure: Appointed August 2001 (16 years) Previous Group roles: Jan Gustavsson served as Deputy General Counsel for Coca‑Cola Beverages plc from 1999-2001. Outside interests: No external appointments Previous relevant experience: Jan Gustavsson started his career in 1993 with the law firm of White & Case in Stockholm, Sweden. In 1995, he joined The Coca‑Cola Company as Assistant Division Counsel in the Nordic and Northern Eurasia Division. From 1997 to 1999, Jan Gustavsson was Senior Associate in White & Case’s New York office, practicing securities law and M&A. Nationality: Swedish

92 Coca-Cola HBC 2017 Integrated Annual Report Operating Committee key activities and decisions in 2017 Strategic Report

Business case reviews Long-term and approvals direction-setting Dec Jan –– Strategic revenue- –– Defining Group strategic generating initiatives priorities and performance and product launches Nov Feb parameters –– Strategic transformation –– Reviewing and adjusting the of supply chain, human Group’s revenue growth Corporate Governance resources, commercial, management framework finance and business Oct Mar and aligning with local solutions and systems commercialisation plans departments –– Aligning our sustainability –– Optimisation of our logistics priorities on the way to and manufacturing Sept Apr delivering 2020 infrastructure commitments –– Development of our business –– Reviewing our route- services organisation to‑market approach Aug May Policy formulation Business planning and reviews Financial Statements July June –– Evaluating and updating –– Commercial policy the Group’s long-range business plan Priority projects –– Reviewing and approving annual business plans for –– Revenue growth 2017 for all operations and management Risk, safety and business resilience central functions –– Route to market –– Evaluating the Group’s business resilience strategies –– Approving Group and –– Renewing category growth country talent, capabilities –– Right Execution Daily –– Reviewing the Group’s health and safety policies and material incidents development and –– Engagement succession plans –– Business Performance Swiss Statutory Reporting Management System (BPMS) Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 93 CORPORATE GOVERNANCE REPORT CONTINUED

A WELL-DEFINED FRAMEWORK FOR RISK MANAGEMENT

Role and responsibilities Letter from the Chair of the Audit The Audit and Risk Committee monitors the effectiveness of our and Risk Committee financial reporting, internal control and risk management systems and processes. The role of the Audit and Risk Committee is set out in the charter for the committees of the Board of Directors in Annex C to the Company’s Organisational Regulations. This is available at http://coca-colahellenic.com/en/about-us/corporate- governance/corporate-governance-overview/. The key responsibilities of and elements of the Audit and Risk Committee’s role are set out on page 81.

Members Membership status William W. (Bill) Douglas III (Chairman) Member since 2016, Chairman since 2016 John P. Sechi Member since 2014 Olusola (Sola) David-Borha Member since 2015

The Audit and Risk Committee comprises three independent Dear Shareholder non-Executive Directors, Bill Douglas (Chairman), Olusola (Sola) David-Borha, and John P. Sechi, who were each re-elected for a The Audit and Risk Committee focused its work during 2017 on one-year term by the shareholders at the Annual General Meeting enhancing and strengthening the Group’s existing financial on 20 June 2017. controls and risk management and compliance systems, including in relation to its financial reporting process and in The Board remains satisfied that Bill Douglas,John Sechi, and Sola relation to the process for preparing consolidated accounts, David-Borha possess recent and relevant financial and sector which the Board recognises as essential components of experience in compliance with the UK Corporate Governance effective corporate governance. Code. Bill Douglas was formerly Executive Vice President and Chief Financial Officer, and Executive Vice President, Supply Chain of During 2017, the Audit and Risk Committee also worked closely Coca‑Cola Enterprises, and John Sechi and Sola David-Borha have with the internal audit and finance teams in implementing the held a number of senior financial positions. Further details on their Group’s internal control framework. The Committee also experience are set out in their respective biographies on pages considered developments in accounting and regulatory matters 75 and 73 respectively. including changes to IFRS accounting standards, initiatives around human rights and gender diversity, and the new EU Data The Chief Financial Officer, as well as the General Counsel, external Protection Regulation. auditors, the Director of Internal Audit, and the Group Chief Accountant normally attend all meetings of the Audit and Risk The Audit and Risk Committee Report describes in more detail Committee. Other officers and employees are invited to attend the work and the achievements of the Audit and Risk meetings when appropriate. The Director of Internal Audit, and, Committee during 2017 and we are proud to report that the separately, the external auditors, meet regularly with the Audit and Committee addressed the challenges the business faced during Risk Committee without the presence of management to discuss the year and ensured that we have a well-defined framework for the adequacy of internal controls over financial reporting and any financial controls and risk management that meets best practice other matters deemed relevant to the Audit and Risk Committee. standards. Work and activities The Audit and Risk Committee met eight times during 2017 and discharged the responsibilities defined under Annex C of the Organisational Regulations. The work of the Audit and Risk William W. (Bill) Douglas III Committee during the accounting year included consideration of: Committee Chair –– the annual financial statements and the annual financial report for the year ended 31 December 2016 prior to their submission to the Board for approval, including consideration of the Group on a going concern basis, and compliance with Group policies; –– the interim financial statements and interim results announcement for the six-month period ending 30 June 2017, prior to their submission to the Board for approval; –– the trading updates for the three-month period ended 31 March 2017 and the nine-month period ended 29 September 2017; –– areas of significance in the preparation of the financial statements;

94 Coca-Cola HBC 2017 Integrated Annual Report –– the internal control environment, principal risks and risk Priorities for 2018 Strategic Report management systems and the Group’s statement on the The key priorities for 2018 are the following: effectiveness of its internal controls prior to endorsement by the Board; –– monitoring the developments in accounting and regulatory –– review of the Viability Statement scenarios and underlying matters including potential changes to IFRS accounting assumptions and recommendations to the Board that the standards; Viability Statement be approved; –– implementation of the new EU Data Protection Regulation; and –– review and approval of the internal audit plan, quarterly reports –– ongoing monitoring of risks as well impairment testing of goodwill on the results of internal audit work and an internal and external and intangible assets. independent quality assessment of the internal audit function in accordance with the Institute of Internal Auditors Attribute External auditor

Standard 1312, including the following: PricewaterhouseCoopers AG, Birchstrasse 160, CH 8050 Zurich, Corporate Governance –– reassessment of the overall financial risk management Switzerland (‘PwC AG’) has been elected by the shareholders as the of the Group’s operations and review of internal financial statutory auditor for the Group’s statutory consolidated and control procedures; stand-alone financial statements. Signing partner for the statutory –– review of regulatory changes and developments and impact financial statements on behalf of PwC AG is Mike Foley, who has on risk management processes; held this role since the year ended 31 December 2016. –– review and approval of changes to the corporate audit The Board, at the recommendation of the Audit and Risk department, including training and development programmes; Committee, has retained PricewaterhouseCoopers S.A., 268 –– matters arising under the Group’s Code of Business Conduct Kifissias Avenue – 15232 Halandri, Greece (‘PwC S.A.’), an affiliate of and the actions taken to address any identified issues; and PwC AG, to act as the Group’s independent registered public –– revisions to and compliance with treasury policies, including accounting firm for the purposes of reporting under the UK rules

risk limits, hedging programmes and counterparty limits; for the year ended 31 December 2017. Signing partner for the Financial Statements –– the geopolitical developments in Greece, Russia, Ukraine and financial statements on behalf of PwC S.A. is Marios Psaltis, who has Nigeria, and their implications for the Group’s operations; held this role for five years. –– regular reports on quality assurance, health and safety, The appointment of PwC has been approved by the shareholders environmental protection, asset protection, treasury and financial until the next Annual General Meeting by way of advisory vote. risks, security and security enterprise risk management processes; ‘PwC’ refers to PwC AG or PwC S.A., as applicable, in this –– reports from the external auditor on the annual and interim Annual Report. financial statements, approval of the external audit plan and pre-approval of audit fees for 2017; and During the accounting period, the members of the Audit and Risk –– the results of the Audit and Risk Committee self-assessment Committee met separately with PwC on a regular basis and the process. Audit and Risk Committee took an active role in reviewing the scope of the audit, the independence, objectivity and effectiveness Swiss Statutory Reporting Areas of key significance in the preparation of PwC, and the negotiations relating to audit fees. The Audit and Risk Committee also met with the management team, which led of the financial statements the discussions with PwC, including the Director of Internal Audit, to The Audit and Risk Committee considered a number of areas of key discuss the performance of PwC without PwC being present. significance in the preparation of the financial statements in 2017 Following this review process, the Audit and Risk Committee has including the following: recommended to the Board that a proposal to reappoint PwC be –– critical accounting judgements and estimates that affect the put to a shareholders’ vote at the next Annual General Meeting. reported amounts of assets, liabilities, revenues and expenses, PwC has acted as the Group’s sole external auditor since 2003. The and the disclosure of contingent assets and liabilities in the Company ran a competitive tender for the external auditor services consolidated financial statements including income taxes (detailed in 2015 which was overseen by the Audit and Risk Committee. in Notes 5, 10 and 28 to the consolidated financial statements); Following the evaluation of the proposals, the Audit and Risk –– contingencies, legal proceedings, competition law and regulatory Committee concluded in 2015 that the best interests of the Group Supplementary Information procedures, including cases involving the national competition and its shareholders would be served by retaining PwC as external authorities of Greece and Switzerland and litigation matters in auditor and made such recommendation to the Board. PwC was Nigeria, Russia, Italy and Greece, and the impact of these on the reappointed by the Board as the Group’s external auditor with consolidated financial statements and accompanying notes; effect from 11 December 2015. Currently, the Audit and Risk –– the impairment testing of goodwill and indefinite-lived intangible Committee anticipates that the audit contract will be put out to assets with a particular emphasis on reviewing and challenging tender again in 2025. There are no contractual or other obligations the key assumptions used in the value-in-use calculation and the restricting the Group’s choice of external auditor. sensitivity analysis performed for the material operations with reduced financial headroom. These assumptions, and a discussion of how they are established as well as the sensitivity analysis, are described in Note 13 to the consolidated financial statements; and Coca-Cola HBC 2017 Integrated Annual Report 95 CORPORATE GOVERNANCE REPORT CONTINUED

Non-audit services provided by the external auditor All other fees The Audit and Risk Committee considers the independence, in Fees for non-audit services paid to PwC or affiliates for the year both fact and appearance, of the external auditor as critical and has ended 31 December 2017 were €nil million. There were €0.1 million long had an auditor independence policy providing definitions of the in fees for non-audit services paid to PwC or affiliates during the services that the external auditor may and may not provide. The year ended 31 December 2016. policy requires the Audit and Risk Committee’s pre-approval of all audit and permissible non-audit services provided by the external Risk management auditor. Such services include audit, work directly related to audit, During 2017, the Company continued to revise and strengthen its and certain tax and other services as further explained below. In approach to risk management as described in detail on pages 55 to practice, the Audit and Risk Committee applies the policy 63. The primary aim of this framework is to minimise our exposure restrictively and approval for work other than audit and audit- and ensure that the nature and significance of all risks we are facing related services is rarely granted. are properly identified, reviewed, managed and, where necessary, Under the policy, pre-approval may be provided for work associated escalated. A quarterly risk assessment is undertaken by the with: statutory or other financial audit work under IFRS or according countries and corporate office support functions, and significant to local statutory requirements; attestation services not required risks are then reported to the Region Directors and the Chief Risk by statute or regulation; accounting and financial reporting Officer. The Company’s Group Risk Forum reviews the identified consultation and research work necessary to comply with generally risks biannually and presents issues of critical exposure to the accepted accounting and auditing standards; internal control Operating Committee. The latter, after careful review, reports to reviews and assistance with internal control reporting the Audit and Risk Committee material risks and mitigating actions. requirements; review of information systems security and controls; This process is both top-down and bottom-up and is designed tax compliance and related tax services, excluding any tax services to ensure that risks arising from business activities are prohibited by regulatory or other oversight authorities; expatriates’ appropriately managed. and other individual tax services; and assistance and consultation Finally, we have in place third-party insurance to cover residual on questions raised by regulatory agencies. For each proposed insurable risk exposure such as property damage, business service, the external auditor is required to provide detailed back-up interruption and liability protection, including Directors’ and officers’ documentation at the time of approval to permit the Audit and Risk insurance for our Directors and officers as well as for the officers Committee to make a determination whether the provision of such and directors of certain subsidiaries. services would impair the external auditor’s independence. PwC has complied with the policy for the financial year ended on Internal control 31 December 2017 and there have been no changes to the policy The Board has ultimate responsibility for ensuring that the during the year. Company has adequate systems of financial control. Systems of financial control can provide only reasonable and not absolute Audit fees and all other fees assurance against material misstatements or loss. In certain of the countries in which we operate, our businesses are exposed to a Audit fees heightened risk of loss due to fraud and criminal activity. We review The total fees for audit services paid to PwC and affiliates were our systems of financial control regularly in order to minimise approximately €4.3 million for the year ended 31 December 2017, such losses. compared to approximately €4.5 million for the year ended 31 The Board has adopted a chart of authority defining financial and December 2016. The total fees for 2017 include fees associated other authorisation limits and setting procedures for approving with the annual audit and reviews of the Group’s half-year reports, capital and investment expenditure. The Board also approves prepared in accordance with IFRS and local statutory audits. detailed annual budgets. It subsequently reviews quarterly performance against targets set forth in these plans and budgets. A Audit-related fees key focus of the financial management strategy is the protection of Fees for audit-related services paid to PwC and affiliates for the our earnings stream and management of our cash flow. year ended 31 December 2017 were €0.4 million compared to €0.4 The Board and its committees have conducted an annual review of million for the year ended 31 December 2016. the effectiveness of our risk management system and internal control systems in accordance with the UK Corporate Governance Tax-related fees Code. Part of this review involves regular review of our financial, Fees for tax services to PwC and affiliates for the year ended 31 operational and compliance controls by the Audit and Risk December 2017 were €nil million compared to €0.1 million for the Committee, which then reports back to the Board on its work and year ended 31 December 2016. findings as described above. The Board confirms that it has concluded that our risk management and internal control systems are effective.

96 Coca-Cola HBC 2017 Integrated Annual Report Internal audit In 2017, we received 292 allegations (2016: 186) of which 98 Strategic Report Our internal audit function reports directly to the Audit and Risk (2016: 48) were received through the whistle-blower hotline. Committee, which reviews and approves the internal audit plan for All allegations involving potential Code of Business Conduct each year. The internal audit function consists of approximately 40 violations were investigated in accordance with the Group Code full-time professional audit staff based in Athens, Budapest, Sofia, of Business Conduct Handling Guidelines. Of those investigated, Moscow and Lagos, covering a range of disciplines and business 124 (2016: 79) matters were substantiated as code violations expertise. One of the responsibilities of the internal audit function is of which 35 (2016: 20) involved an employee in a management to confirm to the Board the effective operation of our internal position or involved a loss greater than €10 thousand. For control framework. For this purpose, the Director of Internal Audit details concerning the handling of allegations received in 2017 makes quarterly presentations to the Audit and Risk Committee see our website. and meets regularly with the Audit and Risk Committee without the

presence of our management. Disclosure Committee Corporate Governance A Disclosure Committee has been established and disclosure In addition, the internal audit function reviews the internal financial, controls and procedures have been adopted to ensure the operational, and compliance control systems across all the accuracy and completeness of our public disclosures. The jurisdictions in which we operate and reports its findings to Disclosure Committee is composed of the Chief Financial Officer, management and the Audit and Risk Committee on a regular basis. the General Counsel, the Director of Investor Relations and the The internal audit function focuses its work on the areas of greatest Group Chief Accountant. risk to us, as determined by a risk-based approach to audit planning. As part of our commitment to maintaining and strengthening best practice in corporate governance matters, we also consistently Performance reporting seek to enhance our internal control environment and risk Reports on our annual performance and prospects are presented in management capability. the Annual Report following recommendation by the Audit and Risk

Committee. We also prepare a half-yearly financial report on our Financial Statements The internal audit function prepares audit reports and performance during the first six months of the financial year. In recommendations following each audit and appropriate measures 2015, the Group discontinued the practice of quarterly reporting. In are then taken to ensure that all recommendations are line with UK practice, we have adopted half-year and full-year implemented. Status reports on our management’s reports, and Q1 and Q3 trading updates effective from Q1 2015. implementation of internal audit recommendations are provided to Internally, our financial results and key performance indicators are the Audit and Risk Committee on a quarterly basis. Significant reviewed by the Operating Committee on a monthly basis. This issues, if any, are raised at once. There were no such issues in 2017. information includes comparisons against business plans, forecasts The Chief Executive Officer, the Chief Financial Officer, the General and prior year performance. The Board of Directors receives Counsel, the Group Chief Accountant and the region and country updates on performance at each Board meeting, as well as a managers have access to the implementation status of the monthly report on our business and financial performance. recommendations at all times. Swiss Statutory Reporting Whistle-blowing measures We operate a hotline to receive, retain, investigate and act on employee complaints or concerns regarding accounting, internal control or ethical matters. This includes any matters regarding the circumvention or attempted circumvention of internal controls including matters that would constitute a violation of our Code of Business Conduct or matters involving fraudulent behaviour by officers or employees of the Group. All such allegations, complaints or concerns may be communicated in a variety of ways, in local languages and on an anonymous basis, to our Director of Internal Audit. Communications received by the Director of Internal Audit, Supplementary Information or directly through the hotline, are kept confidential and, where requested, anonymous. The Director of Internal Audit liaises regularly with the General Counsel and communicates all significant allegations to the Chairman of the Audit and Risk Committee.

Coca-Cola HBC 2017 Integrated Annual Report 97 CORPORATE GOVERNANCE REPORT CONTINUED

FOCUS ON THE COMPOSITION OF THE BOARD

Letter from the Chair of the Nomination Committee Following the untimely death of Dimitris Lois, Chief Executive Officer from 2011 until he passed away in October 2017, the Nomination Committee led a thorough process that resulted in the appointment of Zoran Bogdanovic as the Company’s new Chief Executive Officer. Zoran Bogdanovic brings a track record of delivering results across our territories and demonstrating the values that are the foundation of our Company culture. He will also be nominated as an Executive Director on the Board at the Annual General Meeting in 2018. In 2018, the Committee will continue to review the balance of skills, experience and diversity on the Board and will also focus on the talent development, employee engagement and gender diversity initiatives necessary to ensure that the Group has the people and skills to deliver on its strategy. The Committee will Dear Shareholder also oversee an internally facilitated self-assessment process. The work of the Nomination Committee has continued to focus on the composition of the Board and the important task of A summary of the Group’s Nomination Policy for the succession planning. recruitment of Board members is available online at: https:// coca-colahellenic.com/media/1549/summary-of-nomination- As a result of our 2017 review to ensure an appropriate balance policy-for-recruitment-of-board-members.pdf. The Board of skills, experience, independence and knowledge, we Diversity Policy is described on page 100. recommended Charlotte Boyle as a new non-Executive Director following the retirement of Antonio D’Amato in June 2017. Charlotte Boyle brings significant skills and experience in the areas of people, talent, succession and executive remuneration to the Board, Nomination Committee and Remuneration Committee. Reto Francioni Committee Chair

98 Coca-Cola HBC 2017 Integrated Annual Report Role and responsibilities Work and activities Strategic Report The function of the Nomination Committee is to support the Board The Nomination Committee met four times during 2017 and in fulfilling its duty to conduct a Board self-assessment, to establish discharged the responsibilities defined under Annex C of the and maintain a process for appointing new Board members and to Company’s Organisational Regulations. The Chief Executive manage, in consultation with the Chairman, the succession of the Officer and the Group Human Resources Director regularly attend Chief Executive Officer. The formal role of the Nomination meetings of the Nomination Committee. In addition, the Chairman Committee is set out in the charter for the committees of the is actively involved in the work of the Nomination Committee Board of Directors in Annex C of the Company’s Organisational concerning succession planning and the selection of key people. Regulations. This is available online at http://coca-colahellenic. In 2017, the General Counsel also met with the Nomination com/en/about-us/corporate-governance/corporate-governance- Committee on several occasions. During 2017, the work of the overview/. Nomination Committee included consideration of:

Key elements of the Nomination Committee’s role are set out on –– leading the process for the appointment of the new Chief Corporate Governance page 81. Executive Officer

Members Membership status –– succession planning and development of plans for the Reto Francioni (Chairman) Member since 2016, recruitment of new Board members; Chairman since 2016 –– composition of the Board, including the appropriate balance of Charlotte J. Boyle Member since 2017 skills, knowledge, experience and diversity; Alexandra Papalexopoulou Member since 2015 –– agreeing the process for the recruitment and nomination of new Board members; The members of the Nomination Committee are Reto Francioni, –– review of the talent management framework; Charlotte Boyle, and Alexandra Papalexopoulou. At the Annual –– compilation of a list of potential candidates to fill roles on the General Meeting on 20 June 2017, Antonio D’Amato retired as a Board in conjunction with executive search consultants; member of the Board and member of the Nomination Committee Financial Statements –– recommendation to the Board of proposed candidates for and the Board appointed Charlotte Boyle to replace him. At the appointment to the Board; Annual General Meeting on 20 June 2017, Reto Francioni and Alexandra Papalexopoulou were also re-elected for a one-year –– the performance evaluation and annual assessments of the term by the shareholders. Since June 2015 all members of the committees and the Board; Nomination Committee have been independent non-Executive –– review of the Director induction process and training Directors and the Nomination Committee is chaired by programmes; and Reto Francioni. –– review of the Group’s Inclusion and Diversity Policy.

Committee at work – Recruitment process Swiss Statutory Reporting

Succession Board Recruitment Shortlisting planning composition Supplementary Information

Interview Balance Appointment Introduction of skills

Coca-Cola HBC 2017 Integrated Annual Report 99 CORPORATE GOVERNANCE REPORT CONTINUED

As the result of the Nomination Committee’s review of the Priorities for 2018 composition of the Board in 2017, the Nomination Committee The Nomination Committee’s priorities for 2018 include: recommended Charlotte Boyle to be appointed as a new non‑Executive Director, and as a member of the Nomination –– successful onboarding of the new CEO; Committee and Remuneration Committee following the retirement –– continuous work on succession plans for Board and senior of Antonio D’Amato. The Nomination Committee used the services management positions; and of Lygon Group, an external search consultant, to help with the –– internal Board and committee assessments. appointment of Charlotte Boyle. Lygon specialises in senior recruitment assignments and has no other connections with Performance evaluation of the Board the Company. The Nomination Committee led the annual assessment of the Following the untimely death of Dimitris Lois in October 2017, the performance of the Board and its committees during the year with Nomination Committee led a thorough process and benchmarking the support of Lintstock, an external advisory firm. The key areas exercise that resulted in the appointment of Zoran Bogdanovic as included in the assessment were Board structure and diversity, the Group’s new Chief Executive Officer. He will also be nominated timeliness and quality of information, Board discussions, as an Executive Director on the Board at the Annual General committees and their operation, succession planning, risk appetite Meeting in 2018. and risk management, and remuneration and performance. The scores were overall high and the results of the evaluation were The Nomination Committee and the Board undertook a formal presented at the December 2017 Board meeting. Further details process to find an appropriate candidate for the CEO position. on the internal board evaluation are set out on page 84. Egon Zehnder International supported the Committee to design and implement a robust succession process. As with all employees, the Group offers training opportunities to the Board and senior management in order to improve their skills, and Egon Zehnder International provides recruitment and career encourages all Board members and senior management to gain development services to the Company from time-to-time, but relevant experience and knowledge to fulfil their position’s duties. does not have any other connection with the company. The main steps of the succession process in summary were as follows: Diversity –– a Chief Executive Officer role profile for the Group was prepared The Group continues to be deeply committed to policies and agreed by the Committee; promoting diversity, equal opportunity and talent development at –– the Committee conducted initial reviews and assessed a list of every level throughout the Group, including at Board and internal and external candidates against the agreed profile to management level, and is constantly seeking to attract and recruit produce a shortlist of potential candidates; highly qualified candidates for all positions in its business. The –– after due consideration, the Committee concluded that Zoran Group’s Inclusion and Diversity Policy applies to all people who work Bogdanovic was the lead candidate for the position, based, for us. Further details on the Group’s Inclusion and Diversity Policy among other things, on the Company’s pre-existing succession are set out on page 31 in the Strategic Report. planning work and his strong track record with the Company; –– with the support of the external consultant, the Committee The Group believes that diversity at Board level acts as a key driver conducted a very extensive interview and assessment process, of Board effectiveness, helps to ensure that the Group can achieve which confirmed Zoran Bogdanovic as a qualified and suitable its overall business goals, especially in light of our geographical candidate for the position; footprint, and is critical in promoting a diverse and inclusive culture across the whole Group. The Board has now adopted a formal –– Zoran Bogdanovic was benchmarked against external Board Diversity Policy. candidates; –– the Committee considered all available facts and concluded that The Group’s Board Diversity Policy guides the Nomination due to his proven leadership skills, strategic agility, industry Committee and the Board in relation to their approach to diversity expertise and cultural fit, Zoran Bogdanovic was the best in respect of succession planning and the selection process for the qualified candidate for the position; and appointment of new Board members. The Nomination Committee is responsible for implementing this policy and for monitoring –– the Board unanimously approved the Committee’s progress towards the achievement of its objectives. recommendation. Under the Board Diversity Policy, the Nomination Committee is required to take into account all aspects of diversity, including age, ethnicity, gender, educational and professional background when considering succession planning and new Board appointments. Board appointments are evaluated on merit against objective criteria with due regard for diversity to ensure that candidates contribute to the balance of skills, experience, knowledge and diversity of the Board.

100 Coca-Cola HBC 2017 Integrated Annual Report Since 31 December 2016, there has been an increase in the Strategic Report number of women on the Board from 15% to 25% following the appointment of Charlotte Boyle (reducing to 23% if Zoran Bogdanovic is elected at the Annual General Meeting of the Company as proposed (see page 78)). The percentage of managers who were women has also increased from 33% as at 31 December 2016 to 35% as at 31 December 2017, while the percentage of women among executive leaders remained 30%. The Nomination Committee, in conjunction with the Operating Committee, will continue to monitor the proportion of women at all levels of the Group and ensure that all appointments are made with a view to having a high level of diversity within the workplace and in Corporate Governance leadership positions. Financial Statements Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 101 CORPORATE GOVERNANCE REPORT CONTINUED

FOCUS ON ACHIEVING OUR 2020 SUSTAINABILITY GOALS

Letter from the Chair of the Social Responsibility Committee

The Committee also oversaw the Group’s continued efforts to align and integrate its sustainability priorities to its overall business strategy, particularly in the areas of use of clean and renewable energy, carbon emissions, packaging light-weighting, recovery for recycling, and sustainable sourcing. We are particularly pleased that in 2017 the CDP (formerly the Carbon Disclosure Project) recognised these efforts, considering Coca-Cola HBC as a global leader in the areas of climate and water. We are especially proud that in addition to being named the industry leader on both the Dow Jones World and Europe Sustainability Indices for a record four consecutive years, Coca-Cola HBC has now also taken the lead within the food, beverage and tobacco industry group as a whole. Dear Shareholder In 2017, the Committee continued its overview and monitoring of The Committee will continue to promote the sustainability the implementation of our sustainability strategy. During the year, agenda within the organisation, and ensure that this remains particular emphasis was placed on the progress made against the a key driver of our corporate reputation as a leader in the field. targets associated with the Group’s 2020 sustainability commitments, details of which are set out on page 25. At the same time, we continued monitoring regulatory developments in the area of sustainability, with an emphasis on Anastasios I. Leventis the circular economy, within the framework of the related Committee Chair European Union policy package.

102 Coca-Cola HBC 2017 Integrated Annual Report Role and responsibilities Notably, the Social Responsibility Committee reviewed, and Strategic Report The Social Responsibility Committee is responsible for the endorsed, the process for the annual assessment of material development and supervision of procedures and systems to ensure issues, which combined input from both business leaders and the pursuit of the Group’s social and environmental goals. The internal stakeholders, in accordance with the framework of the formal role of the Social Responsibility Committee is set out in the International Integrated Reporting Council (IIRC), the GRI charter for the committees of the Board of Directors in Annex C of Sustainability Report Standards, and the guidance of the the Company’s Organisational Regulations. This is available online Sustainability Accounting Standards Board for the beverage at https://coca-colahellenic.com/en/about-us/corporate- industry. governance/corporate-governance-overview/.The key elements of the Social Responsibility Committee’s role and responsibilities Priorities for 2018 are set out on page 81. The Social Responsibility Committee’s priorities for 2018 include:

Members Membership status Corporate Governance –– overseeing a review of our 2020 commitments in order to Anastasios I. Leventis Member since 2016, identify the key themes and priorities within a longer time frame; Chairman since 2016 –– reviewing and endorsing the Group’s sustainability reporting Alexandra Papalexopoulou Member since 2016 according to the GRI and IIRC frameworks; and José Octavio Reyes Member since 2014 –– addressing potential sparkling soft drinks and plastic packaging taxation. Work and activities The Social Responsibility Committee met four times during 2017 and discharged its responsibilities as defined under Annex C of the Company’s Organisational Regulations. In addition to the members of the Social Responsibility Committee, the Director of Public Financial Statements Affairs and Communication attends all meetings of the Committee. During 2017 the Social Responsibility Committee reviewed and provided guidance and insights to advance the Group’s sustainability approach in the following areas: –– assessment of the Group’s progress regarding the level of disclosure and reporting across all three dimensions of sustainability (economic, environmental and social), with particular focus on the Dow Jones Sustainability Indices and recently introduced GRI Standards; –– monitoring of the rate of implementation and progress made

against the 12 publicly communicated 2020 sustainability Swiss Statutory Reporting commitments; and –– assessment of emerging trends in sustainability and potential implications for Coca-Cola HBC, particularly in the areas of packaging, and health and nutrition. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 103 DIRECTORS’ REMUNERATION REPORT

DRIVING SUSTAINABLE PERFORMANCE

Letter from the Chair of the 2017 performance outcomes Remuneration Committee 2017 saw the business performing well, with a clear strategic direction. With this in mind we are delighted to announce strong results for the 2017 financial year, delivering net sales revenue growth of 5.9% on an FX-neutral basis (an improvement on 2016 performance of 3.0%) and volume growth of 2.2% with positive performance in all segments. Our comparable EBIT margin also improved this year, now at 9.5%. We have sustained our ability to improve cost-efficiency with our operating expenditure at 27.9% of revenue, which is a positive step towards our 2020 target range of 26%-27%. We also saw an improvement in our overall ROIC performance, which reached 12.4% this year. This exceptional performance demonstrates our significant progress towards our 2020 targets. The table below illustrates Company performance achieved against key performance indicators, and highlights those that are used in our Management Incentive Plan (MIP) and Performance Share Plan (PSP) variable pay arrangements.

Volume (m unit cases) Net sales revenue (€m) 2,104 6,522 2016: 2,058 2016: 6,219

FX-neutral NSR Operating expense as generated per case (€) % of NSR (excl. DME) 3.10 25.5% 2016: 3.02 2016: 25.8% Alexandra Papalexopoulou Chair of the Remuneration Committee Comparable EBIT (€m) Free cash flow (€m) 621 426 2016: 518 2016: 431 Dear Shareholder ROIC Comparable EPS (€) As the Chair of the Remuneration Committee, I am pleased to 12.4% 1.233 present our Directors’ Remuneration Report for the year ended 31 2016: 10.3% 2016: 0.972 December 2017. Our primary listing is on the London Stock Exchange and our Company is domiciled in Switzerland. We Included in MIP Included in PSP Other key performance indicators therefore ensure that we comply fully with UK regulations, except where these conflict with Swiss law. The format of our 2017 Applying the remuneration policy for Directors Remuneration Report is consistent with last year's format as there in 2017 were no significant changes in relevant regulations or internal Dimitris Lois, the Company’s Chief Executive Officer since 2011, policies. went on extended leave for medical treatment last year. It was with great sadness that we had to announce his passing on 2 October The Group’s remuneration philosophy and policies are designed 2017. The Remuneration Committee deemed that all death in to attract, motivate and retain the talented people we need to service payments be made in line with the termination policy meet the Company’s strategic objectives, and to give them contained within the approved Executive Director's Remuneration due recognition. To this end, the Remuneration Committee Policy. In line with this policy, no base salary was paid out in lieu of has worked to ensure that the remuneration policy of the Group notice and all outstanding awards under the MIP and PSP were remains fair, transparent and competitive in comparison with pro-rated for time and subject to performance assessment. Under our peers, and that remuneration is linked to business strategy Swiss law, share awards are considered annual compensation and and drives sustainable performance. as such when time pro-rating is required, the year of grant (12 months) and not the vesting period (36 months) for time pro-rating calculations is considered. The Remuneration Committee made the decision that the vesting of these pro-rated PSP awards be accelerated and vest as soon as reasonably practicable to Dimitris Lois’ heirs. Full details of these awards can be found on page 118.

104 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report During the period from 15 September leading up to 7 December, The Remuneration Committee will continue to keep policies under our Chief Financial Officer, Michalis Imellos, took on the role of review so as to ensure that plans and programmes relating to Acting Chief Executive Officer. During this period, he was not remuneration support the Company’s business strategy and are appointed to the Board. The Remuneration Committee made no closely linked to shareholders’ interests. We value the dialogue with additional interim payments for his interim role. shareholders and welcome views on this Remuneration Report. We were pleased with the positive vote for the Company’s Zoran Bogdanovic, previously a Region Director and member of remuneration policy and the Annual Report on Remuneration at the the Operating Committee since 2013, was appointed to the role 2017 Annual General Meeting and trust we shall have your support of Chief Executive Officer on 7 December 2017. His formal again in 2018. appointment to the Board will be put forward for shareholder approval at the next Annual General Meeting in June 2018. The role of the Remuneration Committee Remuneration arrangements for Zoran Bogdanovic have been Corporate Governance determined by the Remuneration Committee and are aligned to The main tasks of our Remuneration Committee are to establish the remuneration policy for Executive Directors. Full details can be the remuneration strategy for the Group and to approve found on page 107. compensation packages for Directors and other select senior management. The Remuneration Committee operates under the In accordance with our remuneration policy, the base salary of Charter for the Committees of the Board of the Company set forth Dimitris Lois had been reviewed earlier this year. In light of in Annex C to the Organisational Regulations of the Company, consideration of base salary increases across the organisation and available on the Group’s website at: http://coca‑colahellenic.com/ market positioning, as well as business and individual performance, en/about-us/corporate-governance/corporate-governance- we decided to recommend increasing his annual base salary by overview/. 2.5%, which was effective 1 May 2017. The Remuneration Committee considered business and individual performance Members Membership status Alexandra Papalexopoulou (Chair) Member since 2015 criteria when recommending the increase. Financial Statements Chair since June 2016 Further, in March 2017 Dimitris Lois received a third grant under the Reto Francioni Appointed June 2016 PSP. The award represented 330% of his base salary at the date of Charlotte J. Boyle Appointed June 2017 grant. These shares were originally subject to a three-year performance period, aligned to the Company’s financial year, with In accordance with the UK Corporate Governance Code, the performance measured to the end of the financial year 2019, and Remuneration Committee consists of three independent non- vesting anticipated in March 2020. The treatment of this award is Executive Directors: Alexandra Papalexopoulou (Chair), Reto provided on page 118. Francioni and Charlotte J. Boyle, who were each elected by the We continue to commit to disclosing MIP targets retrospectively shareholders for a one-year term on 20 June 2017. The and you will find the 2017 performance targets and outcomes Remuneration Committee met four times in 2017: March, June, reported on page 119. September and December. Please refer to the Board and

Committee attendance in 2017 section of the Corporate Swiss Statutory Reporting Governance Report on page 82 for details on the Remuneration Policy changes Committee meetings. Every year, the Remuneration Committee reassesses the Group’s remuneration policy. In 2017, we believed that the remuneration policy could be enhanced to be brought more in line with UK best practice and become more aligned to the long-term strategy of the business. As such, the Remuneration Committee focused on reviewing and approving the implementation of: Alexandra Papalexopoulou –– bonus deferral within the MIP whereby the Chief Executive Chair of the Remuneration Committee Officer will receive half of any bonus as deferred shares which will vest after three years, subject to continued service; and Supplementary Information –– an additional holding period within the PSP whereby any vested shares held by the Chief Executive Officer are subject to a no-sale commitment for two years following the three-year performance period. We believe that these changes support the alignment of management with our business strategy and our shareholders’ interests.

Coca-Cola HBC 2017 Integrated Annual Report 105 DIRECTORS’ REMUNERATION REPORT CONTINUED

Remuneration throughout the Reward strategy and objective The objective of the Group’s remuneration philosophy is to organisation – a snapshot attract, retain and motivate employees who are curious, agile and committed to perform. Our reward strategy seeks to promote a growth mindset and reinforce desirable behaviours, ensuring Attracting Motivating that employees are fairly rewarded and that they recognise their Finding the people we want Achieving financial, business individual contributions are directly linked to the success of and need and non-financial targets the Company. Variable pay is an important element of our reward philosophy. A significant proportion of total remuneration for top managers (including the Chief Executive Officer and the members of the Operating Committee) is tied to the achievement of our business objectives. These objectives are defined by key business metrics that are consistent with our growth strategy and will deliver A competitive long-term shareholder value. The variable pay element increases winning team or decreases based on the achieved business performance. Through equity-related long-term compensation, we seek to ensure that the financial interests of the Chief Executive Officer, the members of the Operating Committee and other top Retaining managers are aligned with those of shareholders. ContinuingRetaining to attract the Recognising best talent All of our remuneration plans, both fixed and variable, are designed Continuing to attract the Adopting behaviours that to be cost-effective, taking into account market practice, business best talent produce exceptional performance and individual performance and experience where performance relevant. We pay close attention to our shareholders’ views in reviewing our remuneration policy and programmes. How we implement our reward strategy

The chart below illustrates how we put our reward strategy into practice, with the different remuneration arrangements that apply to different employee groups.

Chief Executive Officer and Operating Support the alignment with shareholder interests ensuring sustainable Shareholding performance: Committee guidelines –– Chief Executive Officer – required to hold shares in the Company equal in value to 200% of annual base salary within a five-year period. –– Operating Committee – required to hold shares in the Company equal in value to 100% of annual base salary within a five-year period.

Chief Executive Officer and Operating Performance share awards vest over three years. PSP awards are Performance cascaded down to top managers, promoting a focus on long-term Share Plan Committee and selected senior management performance and aligning them to shareholders’ interests.

Selected middle and senior management Cash long-term incentive awards vest over three years. LTIP awards are Long-Term cascaded down to select middle and senior management to promote Incentive Plan a high-performance culture.

All management Management employees may be eligible to receive an award under the Management annual bonus scheme. Performance conditions are bespoke to the role Incentive Plan and business unit.

All employees Employee Share The Employee Share Purchase Plan encourages share ownership Purchase Plan and aligns the interests of our employees with those of shareholders. (dependent on country practice)

Base salaries may reflect the market value of each role as well as the Fixed pay individual’s performance and potential. Retirement and other benefits and benefits (base salary, retirement are subject to local market practice. and other benefits – dependent on country practice)

Note: Participants in the PSP are not eligible to participate in the Long-Term Incentive Plan.

106 Coca-Cola HBC 2017 Integrated Annual Report At a glance – remuneration arrangements for the Chief Executive Officer Strategic Report

The table below summarises the remuneration arrangements in place for Zoran Bogdanovic, our new Chief Executive Officer. See page 118 for total compensation received in the 2017 financial year.

Retirement Other Total Base salary ESPP MIP PSP benefits benefits + = compensation Corporate Governance

Variable pay subject Fixed pay to performance

Pay element Detail Base salary The annual base salary of the newly appointed Chief Executive Officer is €750,000. The salary is reviewed annually and any increase is typically effective 1 May each year. Retirement benefits The Chief Executive Officer participates in a defined benefit pension plan under Swiss law. Employer contributions are 15% of annual base salary. Other benefits Other benefits include (but are not limited to) medical insurance, housing allowance, Company car/ Financial Statements allowance, cost of living adjustment, trip allowance, partner allowance, exchange rate protection, tax equalisation and tax filing support and advice. Benefit levels vary each year depending on need. ESPP The Chief Executive Officer may participate in the Company’s Employee Share Purchase Plan. (Employee Share Purchase Plan) As a scheme participant, the Chief Executive Officer has the opportunity to invest a portion of his salary and/or MIP payments in shares. The Company matches employee contributions on a one-to-one basis up to 3% of salary and/or MIP payout. Awards are subject to potential application of malus and clawback provisions. MIP The MIP consists of a maximum annual bonus opportunity of up to 130% of base salary. (Management Incentive Plan) Payout is based on business performance targets (up to 120% of base salary) and individual

performance (up to 10% of base salary). Swiss Statutory Reporting No bonus will be paid out if the Chief Executive Officer has achieved less than 50% of his individual objectives. 50% of any bonus will be deferred into shares for a further three-year period. Payments are subject to potential application of malus and clawback provisions. PSP The PSP is an annual share award which vests after three years and is subject to two equally (Performance Share Plan) weighted performance conditions: (i) comparable earnings per share (EPS) and; (ii) return on invested capital (ROIC), each measured over a three-year period. Supplementary Information An additional two-year holding period will apply following vesting. Awards are subject to potential application of malus and clawback provisions.

Coca-Cola HBC 2017 Integrated Annual Report 107 DIRECTORS’ REMUNERATION REPORT CONTINUED

Remuneration policy

Introduction The following section (pages 108 to 110) sets out our Directors’ remuneration policy which was approved by the Remuneration Committee in December 2017, following revisions to incorporate annual bonus deferral within the MIP and add an additional holding period to the PSP. This remuneration policy will be put forward to shareholders on a voluntary basis at the next Annual General Meeting in June 2018. Remuneration continues to be structured in a way that attracts, motivates and retains the talented people we need to achieve the Company’s strategic objectives and give them due recognition, whilst driving sustainable performance. It is intended that this remuneration policy will apply from the next Annual General Meeting. As a Swiss-incorporated company, we are not required to put forward our remuneration policy for a shareholder vote, but we intend to do so voluntarily at least every three years (or when there are changes). We continue to endeavour to make sure that our disclosure complies fully with UK regulations, except when these conflict with Swiss law.

Policy table – Chief Executive Officer The Company currently has a single Executive Director, being the Chief Executive Officer. Therefore, for simplicity, this section refers only to the Chief Executive Officer. This remuneration policy would, however, apply for any new Executive Director role, in the event that one were created during the life of this remuneration policy. In that case, references in this section to the Chief Executive Officer should be read as being to each Executive Director. Fixed ​ ​ Base salary ​ Retirement benefits Purpose and link to strategy ​ Purpose and link to strategy To provide a fixed level of compensation appropriate to the To provide competitive, cost-effective post-retirement benefits. requirements of the role of Chief Executive Officer and to support Operation the attraction and retention of the talent able to deliver the The Chief Executive Officer participates in a defined benefit Group’s strategy. pension plan under Swiss law. There is no obligation for employee Operation contributions. Salary is reviewed annually, with salary changes normally effective Normal retirement age for the Chief Executive Officer’s plan is on 1 May each year. 65 years. In case of early retirement, which is possible from the The following parameters are considered when reviewing base age of 58, the Chief Executive Officer is entitled to receive the salary level: amount accrued under the plan as a lump sum. • the Chief Executive Officer’s performance, skills and Malus and clawback provisions do not apply to retirement benefits. responsibilities; Maximum opportunity • economic conditions and performance trends; The contributions to the pension plan are calculated as a • experience of the Chief Executive Officer; percentage of annual base salary (excluding any incentive • pay increases for other employees; and payments or other allowance/benefits provided) based on age • external comparisons based on factors such as: the industry brackets as defined by federal Swiss legislation. This percentage of the business, revenue, market capitalisation, headcount, is currently 15% of base salary and increases to 18% for age geographical footprint, stock exchange listing (FTSE) and other above 55. European companies. Performance metrics Malus and clawback provisions do not apply to base salary. None. Maximum opportunity Whilst there is no maximum salary level, any increases awarded to the Chief Executive Officer will normally be broadly aligned with the broader employee population. The salary increase made to the Chief Executive Officer may exceed the average salary increase under certain circumstances at the Remuneration Committee’s discretion. For example, this may be due to: business and individual performance; material changes to the business; internal promotions; accrual of experience; changes to the role; or other material factors. Performance metrics Individual and business performance are key factors when determining any base salary changes. The annual base salary for the Chief Executive Officer is set out on page 107.

108 Coca-Cola HBC 2017 Integrated Annual Report Other benefits ​ ESPP (Employee Share Purchase Plan) Strategic Report Purpose and link to strategy ​ Purpose and link to strategy To provide benefits to the Chief Executive Officer which are The ESPP is an employee share purchase plan, encouraging broader consistent with market practice. share ownership, and is intended to align the interests of employees Operation including the Chief Executive Officer with those of shareholders. Benefit provisions are reviewed by the Remuneration Committee Operation which has the discretion to recommend the introduction of The ESPP is a voluntary share purchase scheme across many of additional benefits where appropriate. the Group’s countries. The Chief Executive Officer as a scheme Typical provisions for the Chief Executive Officer include benefits participant has the opportunity to invest from 1% to 15% of his related to relocation such as: housing allowance, Company car/ salary and/or MIP payout to purchase the Company’s shares by allowance, cost of living adjustment, trip allowance, partner contributing to the plan on a monthly basis. allowance, exchange rate protection, tax equalisation and tax filing The Company matches the contributions on a one-to-one basis Corporate Governance support and advice. For all benefits, the Company will bear any up to 3% of the employee’s salary and /or MIP payout. Matching income tax and social security contributions arising from such contributions are used to purchase shares one year after the payments. matching. Matching shares are immediately vested. Malus and clawback provisions do not apply to benefits. Dividends received in respect of shares held under the ESPP are Maximum opportunity used to purchase additional shares and are immediately vested. There is no defined maximum as the cost to the Company The Chief Executive Officer is eligible to participate in the ESPP of providing such benefits will vary from year to year. operated by the Company on the same basis as other employees. Performance metrics Malus and clawback provisions apply. Further details may be found None. in the Additional notes to the Executive Director's remuneration policy table section on page 111.

Maximum opportunity Financial Statements Maximum investment is 15% of gross base salary and MIP payout. The Company matches contributions up to 3% of gross base salary and MIP payout. Matching contributions are used to purchase shares one year after the matching. Matching shares are immediately vested. Performance metrics The value is directly linked to the share price performance. It is therefore not affected by other performance criteria. Variable pay ​ ​ MIP (Management Incentive Plan) ​ PSP (Performance Share Plan) Purpose and link to strategy ​ Purpose and link to strategy Swiss Statutory Reporting To support profitable growth and reward annually for contribution To align the Chief Executive Officer’s interests with the interests to business performance. The plan aims to promote a high- of shareholders and increase the ability of the Group to attract and performance culture with stretched individual and business reward individuals with exceptional skills. targets linked to our key strategies. Operation Operation The Chief Executive Officer is granted conditional awards of Annual cash bonus awarded under the MIP is subject to business shares which vest after three years, subject to the achievement and individual performance metrics and is not part of the base for of performance metrics and continued service. Grants take place calculating pension. annually, normally every March. The Chief Executive Officer’s individual objectives are regularly Performance metrics and the associated targets are reviewed and reviewed to ensure relevance to business strategy and are set and determined at the beginning of each performance period to

approved annually by the Chair of the Remuneration Committee ensure that they support the long-term strategies and objectives Supplementary Information and Chairman of the Board of Directors. of the Group and are aligned with shareholders’ interests. Stretched targets for business performance are set annually Dividends may be paid on vested shares where the performance based on the business plan of the Group as approved by the Board metrics are achieved at the end of the three-year period. of Directors. Malus and clawback provisions apply. Further details may be found Performance against these targets and bonus outcomes are in the Additional notes to the Executive Director’s remuneration assessed by the Remuneration Committee, which may policy table section on page 111. recommend an adjustment to the payout level where it considers the overall performance of the Company or the individual’s contribution warrants a higher or lower outcome. Malus and clawback provisions apply. Further details may be found in the Additional notes to the Executive Director’s remuneration policy table section on page 111. Coca-Cola HBC 2017 Integrated Annual Report 109 DIRECTORS’ REMUNERATION REPORT CONTINUED

Variable pay ​ ​ MIP (Management Incentive Plan) ​ PSP (Performance Share Plan) Maximum opportunity ​ Maximum opportunity The Chief Executive Officer’s maximum MIP Awards (normally) have a face value up to 330% of base salary. In exceptional opportunity is set at 130% of annual base salary. circumstances only, the Remuneration Committee has the discretion to grant Threshold, target and maximum bonus opportunity awards up to 450% of base salary. levels are as follows: Performance metrics • Threshold: 5% of base salary Vesting of awards is subject to the three-year Group performance metrics • Target: 70% of base salary based on two equally-weighted measures which have been selected as they are • Maximum: 130% of base salary. aligned to long-term growth and also measure the efficient use of capital, both of which are aligned to our strategic plan: comparable earnings per share Maximum payout is based on business performance (Comparable EPS); and the percentage of net operating profit after tax divided targets (up to 120% of salary) and individual by the capital employed (ROIC). Capital employed is calculated as the average performance (up to 10% of salary). of net borrowings and shareholders’ equity through the year. Performance metrics Following the end of the three-year period, the Remuneration Committee will The MIP awards are based on business metrics linked determine the extent to which performance metrics have been met and, in to our business strategy. These may include but are turn, the level of vesting. Participants may receive vested awards in the form not limited to measures of volume, revenue, profit, of shares or a cash equivalent. cash and operating efficiencies. The weighting of For both performance metrics, achieving threshold performance results in individual performance metrics shall be determined vesting of 25% of the award and maximum performance results in vesting by the Remuneration Committee at the beginning of of 100% of the award. the MIP performance period. Details related to the key performance indicators and individual objectives Performance share awards will lapse if the Remuneration Committee can be found in the Annual Report on Remuneration determines that the performance metrics have not been met. on page 122. Holding period Deferral of MIP Any vested award (net of shares sold to cover tax liability) is subject to a further 50% of any MIP award is to be deferred in shares two-year holding period following the end of the three-year performance which will be made available after a three-year deferral period. During this two-year period these beneficially owned shares are subject period which commences on the first day of the fiscal to a no-sale commitment. Any shares subject to the holding period count year in which the deferred share award is made. towards the shareholding requirement. Deferred shares may be subject to malus and Adjustments clawback (for a period of two years following the In the event of an equity restructuring, the Remuneration Committee may incentive award) to the extent deemed appropriate make an equitable adjustment to the terms of the performance share award by by the Remuneration Committee, in line with adjusting the number and kind of shares which have been granted or may be best practice. granted and/or making provision for payment of cash in respect of any outstanding performance share award. Change in control In the event of change of control, unvested performance share awards held by participants vest immediately on a pro-rated basis if the Remuneration Committee determines that the performance metrics have been satisfied or would have been likely to be satisfied at the end of the performance period, unless the Remuneration Committee determines that substitute performance share awards may be used in place of the previous awards. For vested shares subject to the additional holding period, the holding period will lapse and the participants are no longer subject to the no-sale commitment.

110 Coca-Cola HBC 2017 Integrated Annual Report Additional notes to the Executive Director's remuneration policy table Strategic Report

Chief Executive Officer’s remuneration policy illustration

aimum 4,779

arget 3,202

inimum 1,300 Corporate Governance

ase pay Cash and non-cash benefits ension I S

​ Component Minimum (€ 000s) Target (€ 000s) Maximum (€ 000s) Fixed Base salary1 750 750 750 ​ Pension 113 113 113 ​ Cash and non-cash benefits2, 3 437 453​ 466 Variable MIP –​ 525 975 ​ PSP – 1,361 2,475 Total ​ 1,300 3,202 4,779

1. Represents the annual base salary for the new Chief Executive Officer effective 7 December 2017. Financial Statements 2. Represent the annual cash and non-cash benefits for the new Chief Executive Officer effective 7 December 2017. 3. ESPP employer contributions may vary depending on the MIP payout and whether the Chief Executive Officer decides to contribute a portion. The figures provided have been calculated on the basis of the applicable MIP payout and the Chief Executive Officer deciding to contribute 3% to the ESPP.

ESOP (Employee Stock Option Plan) The ESOP was replaced by the PSP in 2015 and the last grant under the ESOP took place in December 2014. Although the Remuneration Committee does not intend to award under the ESOP going forward, there are still outstanding share option awards which may be exercised in future years. Awards vest in one-third increments each year for three years and can be exercised for up to 10 years from the date of the award.

Malus and clawback provision for variable pay plans Swiss Statutory Reporting The MIP, PSP, ESOP and ESPP plans include malus provisions which give the Remuneration Committee and/or the Board discretion to judge that an award should lapse wholly or partly in the event of material misstatement of financial results and/or misconduct. The Remuneration Committee and/or Board also has the discretion to determine that clawback should be applied to awards under the MIP, PSP, ESOP and ESPP plans for the Chief Executive Officer and members of the Operating Committee. Clawback can potentially be applied to payments or vested awards for up to a two-year period following the payment or vesting.

Changes from previous policy in respect of Executive Directors The Remuneration Committee has updated the policy to provide for: –– bonus deferral within the MIP, whereby the Chief Executive Officer will receive half of any bonus as deferred shares which will vest after three years, subject to continued service; and Supplementary Information –– an additional holding period within the PSP whereby any vested shares held by the Chief Executive Officer are subject to a no-sale commitment for two years following the three-year performance period. The Remuneration Committee considers that these changes support the alignment of management with our business strategy and our shareholders’ interests.

Coca-Cola HBC 2017 Integrated Annual Report 111 DIRECTORS’ REMUNERATION REPORT CONTINUED

Shareholding guidelines In order to strengthen the link with shareholders’ interests, the Chief Executive Officer is required to hold shares in the Company equal in value to 200% of annual base salary. Members of the Operating Committee are required to hold 100% of annual base salary. The required shareholdings are to be achieved within a five-year period starting from the date of the first PSP grant (10 December 2015) or later based on the date of the appointment.

Remuneration arrangements across the Group The remuneration approach for the Chief Executive Officer, the members of the Operating Committee and senior management is similar. The Chief Executive Officer’s total remuneration has a significantly higher proportion of variable pay in comparison with the rest of our employees. The Chief Executive Officer’s remuneration will increase or decrease in line with business performance, aligning it with shareholders’ interests. The structure of the remuneration package for the wider employee population takes into account local market practice and is intended to attract and retain the right talent, be competitive and remunerate employees for promoting a growth mindset, while contributing to the Group’s performance.

Policy table – non-Executive Directors Base fees Purpose and link to strategy To provide a fixed level of compensation appropriate to the requirements of the role of non-Executive Director and to attract and retain high-quality non-Executive Directors with the right talent, values and skills necessary to provide oversight and support to management to grow the business, support the Company’s strategic framework and maximise shareholder value. Operation Non-Executive Directors’ pay is set at a level that will not call into question the objectivity of the Board. When considering market levels, comparable companies typically include those in the FTSE 100 Index with similar positioning as the Company, other Swiss companies with similar market caps and/or revenues, and other relevant European listed companies. The Group’s compensation of non-Executive Directors includes an annual fixed fee plus additional fees for serving on any Board committees. Maximum opportunity Fee levels for non-Executive Directors include an annual fixed fee plus additional fees for membership of Board committees when applicable, as summarised below: • Base non-Executive Director’s fee: €70,000 • Senior Independent Director’s fee: €15,000 • Audit and Risk Committee Chairman fee: €27,500 • Audit and Risk Committee member fee: €13,800 • Remuneration, Nomination and Social Responsibility Committee Chair fees: €11,000 • Remuneration, Nomination and Social Responsibility Committee member fees: €5,500 Other benefits Non-Executive Directors do not receive any benefits in cash or in kind. They are not entitled to severance payments in the event of termination of their appointment. They are entitled to reimbursement of all reasonable expenses incurred in the interests of the Group. Variable remuneration Non-Executive Directors do not receive any form of variable compensation.

Legacy arrangements For the avoidance of doubt, it is noted that the Company will honour any commitments entered into that have previously been disclosed to shareholders.

112 Coca-Cola HBC 2017 Integrated Annual Report Policy on recruitment/appointment Strategic Report

Executive Directors Annual base salary arrangements for the appointment of an Executive Director will be set considering market relevance, skills, experience, internal comparisons and cost. The Remuneration Committee may recommend an appropriate initial annual base salary below relevant market levels. In such situations, the Remuneration Committee may make a recommendation to realign the level of base salary in subsequent years. As highlighted above, annual base salary ‘gaps’ may result in exceptional rates of salary increase in the short term, subject to an individual’s performance. The discretion is retained to offer an annual base salary necessary to meet the individual circumstances of the recruited Executive Director and to enable the hiring of an individual with the necessary skills and expertise. The maximum level of variable pay that may be offered will follow the rules of the MIP and is capped at 130% of the relevant individual’s annual base salary. The maximum level of equity-related pay that may be offered will follow the PSP rules and is capped at 450% of the relevant individual’s annual base salary. The typical PSP award is not expected to surpass 330% of base salary. Different performance Corporate Governance measures may be set initially for the annual bonus taking into consideration the point in the financial year that a new Executive Director joins. The above limits do not include the value of any buyout arrangements. Benefits will be provided in line with those offered according to the Group’s policy for other employees. If an Executive Director is required to relocate, benefits may be provided as per the Group’s international transfer policy which may include transfer allowance, tax equalisation, tax advice and support, housing, cost of living, schooling, travel and relocation costs. Retirement benefits will be in line with the policy table. The Remuneration Committee may consider recommending the buying out of incentive awards that an individual would forfeit by accepting the appointment up to an equivalent value in shares or in cash. In the case of a share award, the Remuneration Committee may approve a grant of shares under the PSP. When deciding on a potential incentive award buyout and in particular the level and value thereof,

the Remuneration Committee will be informed of the time and performance pro-rated level of any forfeited award. Financial Statements It is expected that Executive Directors appointed during the remuneration policy period will be appointed on similar notice provisions to the Chief Executive Officer, allowing for termination of office by either party on six months’ notice.

Non-Executive Directors It is expected that non-Executive Directors appointed during the remuneration policy period will receive the same basic fee and, as appropriate, committee fee or fees as existing non-Executive Directors and will be entitled to reimbursement of all reasonable expenses incurred in the interests of the Group. It is expected that non-Executive Directors appointed during the remuneration policy period will be appointed on a one-year term of appointment, in the same manner as existing non-Executive Directors.

The Company does not compensate new non-Executive Directors for any forfeited share awards in previous employment. Swiss Statutory Reporting

Termination payments The Swiss Ordinance against Excessive Compensation in Listed Companies limits the authority of the Board to determine compensation. Limitations include the prohibition on certain types of severance compensation. Our governance framework ensures that the Group uses the right channels to support reward decisions. In the case of early termination, a non-Executive Director would be entitled to his/her fees accrued as of the date of termination, but not any additional compensation. The Chief Executive Officer’s employment contract does not contain any provisions for payments on termination. Notice periods are set for up to six months and non-compete clauses are 12 months, effective in 2017. The notice period anticipates that up to six months' paid garden leave may be provided. Similarly, up to 12 months of base salary may be paid out in relation to the non-compete period.

In case of future terminations, payments will be made in accordance with the termination policy on page 114. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 113 DIRECTORS’ REMUNERATION REPORT CONTINUED

Good leaver (retirement at 55 or later/at Good leaver Bad leaver Pay element ​ least 10 years' continued service) ​ (redundancy, injury, disability) ​ (resignation, dismissal) ​ Death in service Base salary and ​ Payment in lieu of notice is not permissible. The Company could ask the Chief Executive Officer to be on paid other benefits / garden leave for up to six months. non-Executive Directors’ fees ESPP ​ Unvested shares held in the ESPP will vest ​ Unvested shares under ​ Available ESPP shares will upon termination the ESPP are forfeited be transferred to heirs MIP ​ A pro-rated payout as ​ A pro-rated payout as ​ In the event of resignation ​ A pro-rated payout will of the date of retirement of the date of leaving will or dismissal, as per Swiss be applied and will be paid will be applied. be applied. law, the Chief Executive immediately to heirs Officer is entitled to a based on the latest Deferred shares will Deferred shares will pro‑rated MIP payout. rolling estimate. continue to vest as normal. continue to vest as normal. Any outstanding deferred Deferred shares will shares will lapse. continue to vest as normal. PSP/ESOP ​ Unvested performance ​ All unvested options and ​ All unvested options and ​ All unvested options and shares and options are performance share awards performance share awards performance share awards retained and will continue immediately vest to the immediately lapse without immediately vest subject to vest as normal subject extent that the any compensation. to time and performance to performance conditions Remuneration Committee pro-rating. In the event of resignation, as set out in the award determines that the all vested options must be Any options which vest agreement. performance conditions exercised within six months are exercisable within have been met, or are For vested shares which of the date of termination. 12 months of the date likely to be met at the end are subject to the of termination. of the three-year Upon dismissal, all vested additional holding period, performance period. options must be exercised For vested shares which they will continue to be within 30 days of the date are subject to the subject to the no-sale Any options which vest of termination. additional holding period, commitment until the are exercisable within 12 the no-sale commitment end of the relevant months of the date For vested shares which are will cease immediately. two-year period. of termination. subject to the additional holding period, they will Under Swiss law, share For vested shares which continue to be subject to awards are considered are subject to the additional the no-sale commitment annual compensation holding period, they will until the end of the relevant and as such when time continue to be subject to two-year period. pro-rating is required, the the no-sale commitment year of grant (12 months) until the end of the relevant and not the vesting period two-year period. (36 months) for time pro-rating calculations is considered.

Corporate events In the event of an equity restructuring, the Remuneration Committee may make an equitable adjustment to the terms of the performance share award by adjusting the number and kind of shares which have been granted or may be granted and/or making provision for payment of cash in respect of any outstanding performance share award. In the event of a change of control, unvested performance share awards held by participants vest immediately on a pro-rated basis if the Remuneration Committee determines that the performance condition(s) have been satisfied or would have been likely to be satisfied at the end of the performance period, unless the Remuneration Committee determines that substitute performance share awards may be used in place of the previous awards.

Service contracts Zoran Bogdanovic, the new Chief Executive Officer, has an employment contract with the Company, effective 7 December 2017, that contains a six-month notice period. As noted in the termination payments, the Chief Executive Officer’s employment contract does not include any termination benefits, other than as mandated by Swiss law. The Swiss Code of Obligations requires employers to pay severance when an employment relationship ends with an employee of at least 50 years of age after 20 years or more of service.

114 Coca-Cola HBC 2017 Integrated Annual Report The Chief Executive Officer is also entitled to reimbursement of all reasonable expenses incurred in the interests of the Company. In Strategic Report accordance with the Swiss Ordinance against Excessive Compensation in Listed Companies, there are no sign-on policies/provisions for the appointment of the Chief Executive Officer. The table below provides details of the current service contracts and terms of appointment for the Chief Executive Officer and other Directors.

Unexpired term of service Date originally appointed to the Date appointed to the contract or appointment as Name Title Board of the Company Board of the Company non-Executive Director Anastassis G. David Chairman and 27 July 2006 20 June 2017 One year non‑Executive Director Zoran Bogdanovic Chief Executive Officer NA – to be appointed NA – to be appointed Indefinite, terminable

to the Board at the to the Board at the on six months’ notice Corporate Governance next AGM in June 2018 next AGM in June 2018 Ahmet C. Bozer Non-Executive Director 21 June 2016 20 June 2017 One year Charlotte J. Boyle1 Non-Executive Director 20 June 2017 20 June 2017 One year Antonio D’Amato2​ Non-Executive Director​ 1 January 2002​ –​ –​ Olusola (Sola) David-Borha Non-Executive Director 24 June 2015 20 June 2017 One year William W. (Bill) Douglas III Non-Executive Director 21 June 2016 20 June 2017 One year Reto Francioni Senior Independent 21 June 2016 20 June 2017 One year non-Executive Director Anastasios I. Leventis Non-Executive Director 25 June 2014 20 June 2017 One year Christo Leventis Non-Executive Director 25 June 2014 20 June 2017 One year

Alexandra Papalexopoulou Non-Executive Director 24 June 2015 20 June 2017 One year Financial Statements José Octavio Reyes​ Non-Executive Director​ 25 June 2014​ 20 June 2017​ One year​ Robert Ryan Rudolph Non-Executive Director 21 June 2016 20 June 2017 One year John P. Sechi Non-Executive Director 25 June 2014 20 June 2017 One year

1. Charlotte J. Boyle was appointed to the Board of Directors, the Remuneration Committee and the Nomination Committee at the 2017 AGM on 20 June 2017. 2. Antonio D’Amato retired from the Board of Directors, the Remuneration Committee and the Nomination Committee at the 2017 AGM on 20 June 2017. The Chief Executive Officer’s service contract and the terms and conditions of appointment of the non-Executive Directors are open for inspection by the public at the registered office of the Group.

Consideration of employee views

The Remuneration Committee does not currently consult specifically with employees on policy for the remuneration of the Swiss Statutory Reporting Chief Executive Officer. Pay movement for the wider employment group is considered when making pay decisions for the Chief Executive Officer.

Consideration of shareholder views Shareholder views and the achievement of the Group’s overall business strategies have been taken into account in formulating the remuneration policy. Following shareholder feedback before and after the Annual General Meeting, the Remuneration Committee and the Board consult with shareholders and meet with the largest institutional investors to gather feedback on the Company’s remuneration strategy and corporate governance. The Company would be happy to engage with shareholders in the future to discuss the outcomes of the remuneration policy. In reviewing and determining remuneration, the Remuneration Committee takes into account the following: Supplementary Information –– the business strategies and needs of the Company; –– the views of shareholders on Group policies and programmes of remuneration; –– market comparisons and the positioning of the Group’s remuneration relative to comparable companies; –– input from employees regarding our remuneration programmes; –– the need for similar, performance-related principles for the determination of executive remuneration and the remuneration of other employees; and –– the need for objectivity. Board members, the Chief Executive Officer and Operating Committee members play no part in determining their own remuneration. The Chair of the Remuneration Committee and the Chief Executive Officer are not present when the Remuneration Committee and the Board discuss matters that pertain to their remuneration. This ensures that the same performance-setting principles are applied for executive remuneration and other employees in the organisation.

Coca-Cola HBC 2017 Integrated Annual Report 115 DIRECTORS’ REMUNERATION REPORT CONTINUED

Annual Report on Remuneration

Introduction This section of the Report provides detail on how we have implemented our remuneration policy in 2017 which, in accordance with the UK remuneration reporting regulations, will be subject to an advisory shareholder vote at our 2018 Annual General Meeting.

Activities of the Remuneration Committee during 2017 During 2017, the key Remuneration Committee activities were to: –– review and sign off the 2016 Directors’ Remuneration Report; –– review and recommend the 2017 base salary for the former Chief Executive Officer; –– review and approve 2017 base salaries for the Operating Committee members and general managers; –– review and approve the 2016 MIP payout for the former Chief Executive Officer; –– review and approve payout levels for the 2016 MIP in relation to Operating Committee members and general managers; –– set and approve 2017 PSP targets; –– review award levels for 2017 PSP awards; –– review the Company's Irish pension plans; –– review and approve changes to the Executive Director's remuneration policy – a three-year annual bonus deferral within the MIP and an additional two-year holding period within the PSP; –– following the untimely death of Dimitris Lois in October 2017, determine the payments due to his beneficiaries under the MIP and PSP; and –– review and approve the remuneration arrangements for the new Chief Executive Officer.

Advisors to the Remuneration Committee The Chairman of the Board, the Chief Executive Officer, the Group Human Resources Director, the Group Rewards Director and the General Counsel regularly attend meetings of the Remuneration Committee. While the Remuneration Committee does not have external advisors, in 2017 it authorised management to work with external consultancy firm Willis Towers Watson to provide independent advice on ad hoc remuneration issues during the year. These services are considered to have been independent and relevant to the market. Other than employee engagement benchmarking services, Willis Towers Watson does not provide any other services to the Company. The total cost in connection with providing advice on remuneration issues was €46,328. Willis Towers Watson are members of the Remuneration Consultants Group and provide advice in line with its Code of Business Conduct. Herbert Smith Freehills LLP provide the Company with legal advice. Advice from Herbert Smith Freehills LLP is made available to the Remuneration Committee, where it relates to matters within its remit.

116 Coca-Cola HBC 2017 Integrated Annual Report Non-Executive Directors’ remuneration for the years ended 31 December 2017 and 2016 (EUR) Strategic Report Social Senior Financial Audit and Risk Remuneration Nomination Responsibility Independent Social security ​ year Base fee1 Committee Committee Committee Committee Director contributions2 Total Anastassis G. David FY2017 70,000 – – – – – – 70,000 ​ FY2016 67,500 – – – – – – 67,500 Ahmet C. Bozer FY2017 70,000 – – – – – – 70,000 ​ FY2016 35,000 – – – – – – 35,000 Charlotte J. Boyle3 FY2017 35,000 – 2,750 2,750 – – – 40,500 ​ FY2016 – – – – – – – – Antonio D’Amato4 FY2017 35,000 – 2,750 2,750 – – – 40,500 ​ FY2016 67,500 – 5,250 5,250 – – – 78,000 Corporate Governance Olusola (Sola) David-Borha FY2017 70,000 13,800 – – – – 6,584 90,384 ​ FY2016 67,500 13,150 – – – – 6,344 86,994 William W. (Bill) Douglas lll FY2017 70,000 27,500 – – – – – 97,500 ​ FY2016 35,000 13,750 – – – – – 48,750 Reto Francioni FY2017 70,000 – 5,500 11,000 – 15,000 7,974 109,474 ​ FY2016 35,000 – 2,750 5,500 – 7,500 3,992 54,742 Anastasios I. Leventis FY2017 70,000 – – – 11,000 – – 81,000 ​ FY2016 35,000 – – – 5,500 – – 40,500 Christo Leventis5 FY2017 70,000 – – – – – 2,179 72,179 ​ FY2016 35,000 – – – – – 2,753 37,753

Alexandra Papalexopoulou FY2017 70,000 – 11,000 5,500 5,500 – – 92,000 Financial Statements ​ FY2016 67,500 – 8,000 5,250 2,750 – – 83,500 José Octavio Reyes FY2017 70,000 – – – 5,500 – 4,560 80,060 ​ FY2016 67,500 – – – 5,250 – 5,722 78,472 Robert Ryan Rudolph FY2017 70,000 – – – – – 5,499 75,499 ​ FY2016 35,000 – – – – – 2,753 37,753 John P. Sechi FY2017 70,000 13,800 – – – – – 83,800 ​ FY2016 67,500 13,150 – – – – – 80,650

1. Non-Executive Director fees for 2017 are in line with the fees that were revised in 2016. 2. Social security employer contributions as required by Swiss legislation. 3. Charlotte Boyle was appointed to the Board of Directors, the Remuneration Committee and the Nomination Committee on 20 June 2017. The Group has applied

a half-year period base fee. Swiss Statutory Reporting 4. Antonio D’ Amato retired from the Board of Directors, the Remuneration Committee and the Nomination Committee on 20 June 2017. The Group has applied a half-year period base fee. 5. In June 2017 social security contributions of EUR 2,179, withheld in December 2016, were returned to Christo Leventis, on top of his fees, as he was deemed not subject to Swiss social security. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 117 DIRECTORS’ REMUNERATION REPORT CONTINUED

Single figure table

Single total figure of remuneration for the Chief Executive Officer for the years ended 31 December 2017 and 2016 Cash and Employee Share Retirement Base pay5 non-cash benefits6 Annual bonus7 Purchase Plan 8 Long-term incentives benefits Total single figure ​ € 000s ​ € 000s ​ € 000s ​ € 000s ​ € 000s ​ € 000s ​ € 000s ​ 2017 2016 ​ 2017 2016 ​ 2017 2016 ​ 2017 2016 ​ 2017 2016 ​ 2017 2016 ​ 2017 2016 Dimitris Lois1,2,3 852 899 ​ 498​ 502 ​ 643​ 647 ​ 40 53 ​ 13,227 665 ​ 118 157 ​ 15,378 2,923 Zoran Bogdanovic4 58 0 ​ 35​ 0 ​ 47​ 0 ​ 2 0 ​ 262 0 ​ 6 0 ​ 410​ 0

1. 2017 base salary and all benefits for Dimitris Lois reflect the period 1 January to 2 October 2017, including 2 months' salary and benefits to the heirs as per Swiss law. Relevant payments did not include any variable pay. 2. The annual bonus payout for Dimitris Lois reflects the pro-rated period to 2 October 2017. 3. Long-term incentives reflect the 2015, 2016 and 2017 awards made under the Performance Share Plan, the dividend equivalent shares paid on PSP shares that vested in 2017 and share options that vested to Dimitris Lois in 2017 under the Employee Stock Option Plan. In line with the Performance Share Plan rules, awards were pro-rated for time and performance up to 2 October 2017. For the share options, the value reflects the number of share options multiplied by the market price at vesting minus the exercise price at grant. Further details are included in the table under ‘Arrangements for Dimitris Lois, former Chief Executive Officer’ below. 4. For Zoran Bogdanovic, 2017 base salary and all benefits reflect his role as Chief Executive Officer and hence the period from the date of his appointment, 7 December 2017, to the end of the financial year. Long-term incentives reflect the share options that vested to Zoran Bogdanovic in 2017 under the Employee Stock Option Plan. The value reflects the number of share options multiplied by the market price at vesting minus the exercise price at grant. 5. Base pay includes the monthly instalments linked with the base salary for 2017. A salary increase was applied to the base salary effective from 1 May. 6. Under Cash and non-cash benefits we include the value of all benefits paid during 2017. These are outlined in the Cash and non-cash benefits section below. 7. Annual bonus for 2017 includes the MIP payout, receivable early in 2018 for the 2017 performance year. 8. Employee Share Purchase Plan was previously reported under Cash and non-cash benefits. From 2017 onwards, it is reported separately.

Arrangements for Dimitris Lois, former Chief Executive Officer In line with the provisions for death in service as set out in the relevant compensation plan policies (as outlined on page 114), no base salary in lieu of notice was paid out. The MIP award of 130% of base salary for the 2017 financial year, was pro-rated for time and performance up to 2 October 2017. This pro-rated payment of € 643,208 (69% of base salary), made under the MIP, was paid in March 2018 to his heirs. The performance targets and outcomes can be found in the MIP payout section on page 119. In line with the death‑in‑service provisions, all available plan shares under the ESPP, 56,379 shares, were immediately transferred to his heirs. In line with the PSP rules, all of Dimitris Lois’ outstanding PSP awards were pro-rated for time and performance up to 2 October 2017. The Remuneration Committee deemed it appropriate for all outstanding PSP awards to vest immediately to Dimitris Lois’ heirs – the number of shares that vested is summarised in the table below. The Remuneration Committee deemed that the vesting portion of all outstanding share awards should attract the value of dividend equivalent shares. These dividend equivalent shares vested at the same time as the vesting of the outstanding share awards. The performance targets and outcomes can be found on page 121.

Number of shares to Performance vest (following time Face value of award Time pro-rating pro-rating – % and performance Award Original performance period Time for pro-rating (number of shares) – % vesting vesting pro-rating) 2015 award 1 January 2015 – 1 January 2015 – 138,476​ 100% 100% 138,476​ 31 December 2017 31 December 2015 2016 award 1 January 2016 – 1 January 2016 – 159,876​ 100% 100% 159,876​ 31 December 2018 31 December 2016 2017 award 1 January 2017 – 1 January 2017 – 128,421​ 75% 88% 84,757​ 31 December 2019 2 October 2017 2016 Dividend equivalent shares​ ​ ​ ​ ​ ​ 6,608​ 2017 Dividend equivalent shares​ ​ ​ ​ ​ ​ 6,685​

Under Swiss law, share awards are considered annual compensation and as such when time pro-rating is required, the year of grant (12 months) and not the vesting period (36 months) for time pro-rating calculations is considered.

118 Coca-Cola HBC 2017 Integrated Annual Report Fixed pay for 2017 Strategic Report

Base salary During the year, the Remuneration Committee recommended to the Board for approval a salary increase for Dimitris Lois of 2.5%, resulting in a base salary of €932,000, effective 1 May 2017. When approving this increase, the Remuneration Committee took into consideration base salary increases across the organisation, and alignment and competitiveness versus peers in the FTSE. The salary increase rate for the Swiss-based employees is 1.7%. As described above, upon Dimitris Lois’ death, no base salary in lieu of notice was paid out. Following the appointment of Zoran Bogdanovic to Chief Executive Officer, the Remuneration Committee recommended and the Board approved a base salary of €750,000, effective 7 December 2017. When determining the base salary level, the Remuneration Committee considered alignment and competitiveness versus peers in the FTSE, internal relativities and the experience of the individual. Corporate Governance

Retirement benefits Dimitris Lois received a retirement benefit of 18% of base salary during 2017, which is aligned to the retirement benefit provided under Swiss law and based on the age brackets defined by federal Swiss legislation. Zoran Bogdanovic is to receive an annual retirement benefit of 15% of base salary, aligning to the retirement benefit provided under Swiss law and based on the age brackets defined by federal Swiss legislation. During the year, €5,801 of retirement benefit was received, reflecting the period 7 December 2017 to 31 December 2017.

Cash and non-cash benefits Dimitris Lois received additional benefits during the financial year until his passing on 2 October 2017. This included cost of living and foreign exchange rate adjustment (€299,387), private medical insurance (€22,865), Company car allowance (€23,084), housing allowance Financial Statements (€113,786), trip allowance (€8,268), tax assistance and filing support (€35,777), Company matching contribution related to the ESPP (€40,306 – reflecting the maximum match of 3% under the plan), tax equalisation (€ -162,136), payout of untaken leave days (€36,244) and the value of social security contributions (€121,201). The decrease in tax equalisation in comparison to the prior year is driven by changes in effective tax rates. Cash and non-cash benefits for Dimitris Lois reflect the period 1 January to 2 October 2017 and include two months' payment made to his heirs as per Swiss law. Zoran Bogdanovic received additional benefits during the period 7 December to 31 December 2017. This included cost of living and foreign exchange rate adjustment (€17,928), private medical insurance (€402), Company car allowance (€1,201), housing allowance (€8,260), tax assistance and filing support (€517), Company matching contribution related to the ESPP (€1,750 – reflecting the maximum match of 3% under the plan), tax equalisation (€ -350) and the value of social security contributions (€6,583).

Variable pay for 2017 Swiss Statutory Reporting

MIP performance outcomes – 2017 As outlined above, the annual bonus award in respect of the 2017 financial year for the former Chief Executive Officer was €643,208 reflecting 69% of base salary and this was paid out to his heirs in March 2018. This value reflects time and performance pro-rating up to 2 October 2017. This cash bonus reflects the financial and individual performance achieved during the period 1 January 2017 to 2 October 2017. The financial metrics, the associated targets and level of achievement are set out below (time pro-rating results in a payout of 61% of base salary).

Threshold (0%) Target (15%) Maximum (30%) Payout (% of base salary)

Volume (m unit cases) 1,928 2,095 2,104 2,200 16.3% Supplementary Information

Comparable EBIT (€ m) 529 575 621 621 30.0%

OpEx % of NSR 27.3 25.5 25.3 24.6 13.7%

NSR (€ m) 5,869 6,380 6,522 6,699 21.7%

Total Working Capital Days 6.67 6.08 5.63 4.86 Qualifier to Volume performance measure Achieved

Threshold Target Maximum Actual Total financial performance measures payout 81.7%

Coca-Cola HBC 2017 Integrated Annual Report 119 DIRECTORS’ REMUNERATION REPORT CONTINUED

Following strong performance against the individual objectives set at the beginning of the year, where for all three segments revenue grew faster than 2016 and volume increased, engagement scores were maintained across the business, the EBIT margin grew and CCHBC maintained its industry-leading status as the beverage industry leader on the DJSI, the Remuneration Committee deemed there to be 100% achievement against the individual objectives, resulting in a maximum payout of 7.5% of base salary (time pro-rated amount). Achievement against the Group targets and the respective payout is outlined in the table on page 119. Note that the payout levels have been pro-rated to reflect the period 1 January 2017 to 2 October 2017.

Employee Stock Option Plan (ESOP) outcomes – 2017 The Remuneration Committee will no longer make awards under this plan. Under the grants made in December 2014, a total of 120,000 share options vested this year for Dimitris Lois and 23,334 for Zoran Bogdanovic. Share options vested for Zoran Bogdanovic do not relate to his appointment as a CEO. We have reflected the value of stock option awards that vested during 2017 for both employees, being the number of options multiplied by the market price at vest minus exercise price at grant. In December 2017, the exercise period for certain existing options under the ESOP which were awarded in December 2007 was extended by the Remuneration Committee for a six month period from 13 December 2017 to 13 June 2018 in order to allow option holders the ability to exercise the options outside of closed periods.

Performance Share Plan (PSP) awards – 2017 Since the discontinuation of the ESOP in late 2015, the PSP is now the primary long-term incentive vehicle. In March 2017 the Chief Executive Officer was granted a performance share award over 128,421 shares under the PSP, representing 330% of base salary at date of grant. The award was originally subject to a three-year performance period, aligned to the Company’s financial year, with performance measured to the end of financial year 2019, and vesting anticipated in March 2020. The following table sets out the details of the performance share award made to the former Chief Executive Officer under the PSP for 2017. Type of award made Performance share award over 128,421 shares, receivable for nil cost Share price at date of grant €23.36 (£19.81) Date of grant 16 March 2017 Performance period 1 January 2017 to 31 December 2019 Face value of the award €2,999,700 (The maximum number of shares that would vest if all performance measures and targets are met, multiplied by the share price at the date of grant) Face value of the award as a % of annual base salary 330% Percentage that would be distributed if threshold performance 25% of maximum award was achieved in both PSP key performance indicators Percentage that would be distributed if threshold performance 12.5% of maximum award was achieved only in one PSP key performance indicator

Similar to the award made in March 2016, the 2017 award was subject to comparable earnings per share (EPS) and return on invested capital (ROIC), as outlined below.

​ ​ ​ Threshold ​ Maximum Vesting Vesting (% Measure Description Weighting Target (% of max) ​ Target of max) Comparable EPS Calculated by dividing the comparable net profit attributable 50% 1.24 25% ​ 1.50 100% to the owners of the parent by the weighted average number of outstanding shares during the period. Return on invested ROIC is the percentage return that a company makes over its 50% 13% 25% ​ 15.8% 100% capital (ROIC) invested capital. More specifically, we define ROIC as the percentage of net operating profit after tax divided by the capital employed. Capital employed is calculated as the average of net borrowings and shareholders’ equity through the year.

The vesting schedule for PSP performance conditions is not a straight line between the threshold and maximum performance levels. The Remuneration Committee considers that it is appropriate to place greater emphasis on achieving the target performance level than the outperformance of this level. Zoran Bogdanovic did not receive an award under the PSP in his capacity as Chief Executive Officer during 2017.

120 Coca-Cola HBC 2017 Integrated Annual Report Performance Share Plan (PSP) outcomes – 2017 Strategic Report As outlined on page 118, all of Dimitris Lois’s outstanding awards, including the 2017 award detailed above, were pro-rated for both time and performance. The Remuneration Committee deemed that the vesting of these pro-rated awards be accelerated and that they should vest as soon as reasonably practicable following his passing. Under Swiss law, share awards are considered annual compensation and as such when time pro-rating is required, the year of grant (12 months) and not the vesting period (36 months) for time pro-rata calculations is considered. As such, there is no time pro-rating applied to the 2015 and 2016 PSP awards and we have applied a 75% time pro-rating to the 2017 PSP award to reflect the period January 2017 – October 2017. Where the full three-year performance period had not been completed, the Committee considered levels of performance over the shortened period, assessing 2017 performance against shortened period targets that were used when calibrating the three-year targets and are in line with the original three-year targets. In these circumstances, the Committee deemed this the fairest way to measure performance to 2017 for these outstanding share awards. Full disclosure of these original performance targets, the shortened period performance targets against which performance was measured and the 2017 outcomes are provided below. Corporate Governance

​ Actual to ​ ​ Threshold ​ Maximum ​ the year ending 2017 ​ Original Vesting three-year Shortened Vesting Vesting Total ​ Measure Weighting Target (% of max) ​ target period target (% of max) ​ Achievement (% of max) (% of max) 2015 award EPS 50% 1.08​ 25% ​ 1.31​ 1.16 100% ​ 1.23​ 100%​ 100%​ ​ ROIC 50% 10.1%​ 25% ​ 12.1%​ 10.8% 100% ​ 12.4%​ 100%​ 2016 award EPS 50% 1.08​ 25% ​ 1.31​ 1.16 100% ​ 1.23​ 100%​ 100%​ ​ ROIC 50% 10.1%​ 25% ​ 12.1%​ 10.8% 100% ​ 12.4%​ 100%​ 2017 award EPS 50% 1.11​ 25% ​ 1.50​ 1.19 100% ​ 1.23​ 100%​ 88%​ ​ ROIC 50% 12.0%​ 25% ​ 15.8%​ 12.9% 100% ​ 12.4%​ 75%​ Financial Statements

The 2015 award was made in December 2015 and as such the performance period commenced on 1 January 2016 and hence the performance targets are the same as the 2016 award.

Dilution limit Usage of shares under all share plans and executive share plans adheres to the dilution limits set by the Investment Association Principles of Remuneration (10% for all share plans and 5% for all executive share plans, in any 10-year period).

Implementation of policy in 2018 For 2018, we will continue to apply our approved remuneration policy outlined on pages 108 to 110 as described above. Swiss Statutory Reporting Arrangements for Zoran Bogdanovic, the newly appointed Chief Executive Officer The Remuneration Committee approved a base salary of €750,000 effective from Bogdanovic's date of appointment as Chief Executive Officer on 7 December 2017. His remaining remuneration will be in line with our Executive Director's remuneration policy. The normal maximum bonus potential under the MIP will be 130% of base salary and under the PSP will be 330% of base salary. Additional benefits will include private medical insurance, housing allowance, Company car/allowance, schooling allowance, trip allowance, partner allowance, exchange rate protection, tax equalisation and tax filing support and advice. Any retirement benefit will align to the retirement benefit provided under Swiss law and based on the age brackets defined by federal Swiss legislation. For all benefits, the Company will bear any income tax and social security contributions arising from such payments.

Base salary and fees

Bogdanovic’s base salary will be reviewed in March 2018 at the same time as that of the Operating Committee members and the Supplementary Information general managers. Any base salary increase will be effective 1 May 2018 and is anticipated to be broadly in line with the increase provided to other employees. The fee levels for the Chairman and other non-Executive Directors were last reviewed in 2016 and remained consistent in 2017, as outlined on page 112. Fee levels were reviewed in early 2018 and it was determined that the current base and committee fees are increased by 5% with effect from June 2018.

Coca-Cola HBC 2017 Integrated Annual Report 121 DIRECTORS’ REMUNERATION REPORT CONTINUED

Management Incentive Plan (MIP) The annual bonus award levels for 2018 are expected to be in line with those for 2017. 2018 awards will however now be subject to bonus deferral, whereby 50% of any award will be awarded as deferred bonus shares which will vest three years from their date of grant. The performance measures have been set by the Remuneration Committee to align to our KPIs and are summarised below.

Weighting at maximum opportunity levels Performance measure (% of base salary) Business measures 120% Annual sales volume. Incentivises sustainable growth. TWCD (total working capital days) acts as a qualifier (i.e. if TWCD achievement is below threshold there is no volume payout). 30% Net sales revenue (NSR). Incentivises the Group’s revenue growth objectives. 30% Comparable earnings before interest and tax (Comparable EBIT). Defined as comparable operating profit, this key performance indicator incentivises profitable growth. 30% Operating expenditure (OpEx) excluding DME as a percentage of NSR. This key performance indicator, which excludes direct marketing expenses (DME), incentivises effective cost management and competitiveness. 30% Individual measures 10%

The Remuneration Committee is unable to provide the 2018 bonus award performance targets on a forward-looking basis as they are deemed commercially sensitive. However, the targets will be disclosed in next year’s Remuneration Report once the actual performance against these targets has been realised.

Performance Share Plan (PSP) The levels of PSP awards for 2018 are anticipated to be in line with those awarded in 2017. The performance measures will be consistent with those detailed for the 2017 award outlined in this report and these are summarised below.

​ ​ ​ Threshold ​ Maximum Vesting Vesting Measure Description Weighting Target (% of max) ​ Target (% of max) Comparable EPS Calculated by dividing the comparable net profit 50% 1.51 25% ​ 1.82 100% attributable to the owners of the parent by the weighted average number of outstanding shares during the period. Return on ROIC is the percentage return that a company makes 50% 13.7% 25% ​ 16.4% 100% invested capital from its invested capital. More specifically, we define (ROIC) ROIC as the percentage of net operating profit after tax divided by the capital employed. Capital employed is calculated as the average of net borrowings and shareholders’ equity through the year.

The Remuneration Committee expects to recommend an award of 330% of base salary to the Chief Executive Officer in March 2018, with performance running to the end of December 2020 and vesting occurring in March 2021. These vested shares will then be subject to a further two-year holding period, whereby the Chief Executive Officer agrees to a no sale commitment during this time.

Changes to Chief Executive Officer and employee pay The table below sets out the percentage change in base salary, taxable benefits and annual bonus for the Chief Executive Officer and the average Swiss-based employee. We have chosen to make a comparison with employees in Switzerland as this is the market in which our Chief Executive Officer is based. MIP payouts for the Swiss workforce are primarily based on Swiss business unit results. Benefits include Company matching contributions under the Employee Share Purchase Plan.

​ Annual base salary Benefits Annual bonus Chief Executive Officer % change from 2016 to 2017 1.2% 3.6% 6.7% Average employee % change for the Swiss workforce from 2016 to 2017 1.7% 4.7% 29.5%

The salary increase rate is broadly in line with the salary increase for Swiss-based employees.

Chief Executive Officer pay and performance comparison The graph on page 123 shows the total shareholder return (TSR) of the Company compared with the FTSE 100 Index over a nine-year period to 31 December 2017. The Remuneration Committee believes that the FTSE 100 Index is the most appropriate index to compare historic performance due to the size of the Company and our listing location.

122 Coca-Cola HBC 2017 Integrated Annual Report Total shareholder return versus FTSE 100 Strategic Report

Corporate Governance

ec ec ec ec ec ec ec ec ec ec FS CC ​ 2009 ​ 2010 ​ 2011 ​ 2012 ​ 2013 ​ 2014 ​ 2015 ​ 2016 ​ 2017 Doros Doros Doros Dimitris Dimitris Dimitris Dimitris Dimitris Dimitris Dimitris Zoran ​ Constantinou ​ Constantinou ​ Constantinou Lois ​ Lois ​ Lois ​ Lois ​ Lois ​ Lois ​ Lois Bogdanovic Total remuneration – single figure (€ 000s) 2,887 ​ 3,752 ​ 4,708 711 ​ 1,524 ​ 1,928 ​ 1,918 ​ 3,012 ​ 2,923 ​ 15,378 410​ MIP (% of maximum) 63% ​ 65% ​ 9% 24% ​ 68% ​ 49% ​ 45% ​ 75% ​ 55% ​ 53%​ 5%​ PSP (% of maximum) – ​ – ​ – – ​ – ​ – ​ – ​ – ​ –​ ​ 90%​ – Financial Statements

On 4 July 2011, Doros Constantinou retired from service, and Dimitris Lois succeeded him. The amounts for 2011 include the remuneration of Doros Constantinou up to the retirement date and the remuneration of Dimitris Lois for the remainder of the year. For 2011, the remuneration of Doros Constantinou includes termination benefits due to retirement. As the Company listed on the London Stock Exchange in April 2013, the amounts included in respect of the period before that date relate to the remuneration the Chief Executive Officer received in his capacity as Chief Executive Officer of Coca‑Cola Hellenic Bottling Company S.A. On 15 September 2017, Dimitris Lois went on leave to seek medical treatment and sadly passed away on 2 October 2017. The 2017 base salary values above reflect the period 1 January 2017 to 2 October 2017. The total remuneration value for Zoran Bogdanovic reflects the

period from his appointment as Chief Executive Officer to the end of the financial year, 7 December 2017 to 31 December 2017. Swiss Statutory Reporting Until 2017 there were no PSP awards that vested. PSP % of maximum reflects the average of all three awards (2015, 2016 & 2017) where vesting was accelerated. Relative importance of spend on pay (€m)

2017

otal employee costs istriution to sareolers Supplementary Information

Compared to the prior year, the total staff costs increased by 1%, while the dividends distributed to shareholders have increased by 11%.

Coca-Cola HBC 2017 Integrated Annual Report 123 DIRECTORS’ REMUNERATION REPORT CONTINUED

Shareholder voting outcomes The table below sets out the result of the votes on the remuneration-related resolutions at the Annual General Meeting held in June 2017:

Voting rights Resolution Votes for Votes against Abstentions Total votes cast represented Advisory vote on the UK Remuneration Report 246,074,548 2,762,647 141,690 248,978,885 68.31% ​ 98.83% 1.11% 0.06% ​ ​ Advisory vote on the Swiss Remuneration Report 247,193,583 1,748,622 36,680 248,978,885 68.31% ​ 99.29% 0.70% 0.01% ​ ​ Advisory vote on the remuneration policy 244,288,071 4,654,134 36,680 248,978,885 68.31% ​ 98.12% 1.87% 0.01% ​ ​ Approval of the maximum aggregate amount of 248,653,337 195,828 129,720 248,849,165 68.31% remuneration for the Board until the next Annual General Meeting 99.92% 0.08% 0.0% ​ ​ Approval of the maximum aggregate amount of 248,048,728 608,447 321,710 248,657,175 68.31% remuneration for the Operating Committee for the next financial year 99.76% 0.24% 0.0% ​ ​

The Remuneration Committee was pleased that shareholders supported our remuneration-related resolutions so strongly. We value our ongoing dialogue with shareholders and welcome any views on this report.

Payments to past Directors and payments for loss of office Following the death of Dimitris Lois in October 2017, all outstanding share awards were pro-rated for time and performance and paid out as soon as reasonably practicable to his heirs. Full details on the treatment of these awards and payout levels can be found on page 118. No compensation for loss of office was paid to any Director.

Payments to appointed Directors Charlotte Boyle joined the Board in 2017. As per the recruitment policy for non-Executive Directors, new non-Executive Directors are not compensated for any forfeited share awards or other incentives related to previous employment. Non-Executive Directors do not receive any form of variable compensation, nor any other benefits in cash or in kind. Zoran Bogdanovic was appointed Chief Executive Officer on 7 December 2017, and his remuneration arrangements, which are in line with the shareholder-approved remuneration policy for Executive Directors, are outlined on page 121. His formal appointment to the Board will be put forward for shareholder approval at the next Annual General Meeting in June 2018.

Outside appointments for the Chief Executive Officer Zoran Bogdanovic does not hold any appointments outside the Company.

Total Directors’ and Operating Committee members’ remuneration The table below outlines the aggregated total remuneration figures for Directors and Operating Committee members in the year.

2017 2016 ​ (€ million) (€ million) Total remuneration paid to or accrued for Directors, the Operating Committee and the Chief Executive Officer 27.1​ 24.4 Salaries and other short-term benefits 13.8​ 18.7 Amount accrued for stock option and performance share awards 12.6​ 4.9 Pension and post-employment benefits for Directors, the Operating Committee and the Chief Executive Officer 0.7​ 0.8

Credits and loans granted to governing bodies In 2017, no credits or loans were granted to active or former members of the Company’s Board, members of the Operating Committee or any related persons.

124 Coca-Cola HBC 2017 Integrated Annual Report Share ownership Strategic Report The table below summarises the total shareholding as of 31 December 2017, including any outstanding shares awarded through our incentive plans, for the Chief Executive Officer and other Directors.

​ ​ With performance measures ​ Without performance measures ​ ​ ​ ​ ​ PSP ​ ESOP ​ ESPP ​ ​ ​ Performance Unvested and Number of Current shares subject to Number of Vesting at outstanding shareholding Shareholding Share granted in performance stock options Fully the end shares held1 as as % of base guideline Name interests year 2017 conditions Vested ​ outstanding vested of 2018 ​ at 31-Dec-17 ​ salary1 met1 Dimitris Lois2, 3 Yes​ 128,421​ 426,773​ –​ ​ –​ –​ –​ ​ 57,379​ ​ 179% No Zoran Bogdanovic Yes​ 25,473​ 84,841​ –​ ​ 236,750​ 236,750​​ –​ ​ 19,869​ ​ 72%​ No​ Anastassis G. David4 ​ –​ – –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Ahmet C. Bozer​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ ​– Corporate Governance Charlotte J. Boyle​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Antonio D’Amato​ ​ –​ –​ –​ ​ –​ ​– ​– ​ –​ ​ –​ ​– Olusola (Sola) David-Borha​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ ​– William W. (Bill) Douglas III5​ ​ –​ –​ –​ ​ –​ ​– ​– ​ –​ ​ –​ ​– Reto Francioni​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Anastasios I. Leventis6 ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Christo Leventis7​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Alexandra Papalexopoulou​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ José Octavio Reyes ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Robert Ryan Rudolph​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​ Financial Statements John P. Sechi​ ​ –​ –​ –​ ​ –​ –​ –​ ​ –​ ​ –​ –​

1. The shareholding requirement was introduced from the date of the 2015 PSP award, 10 December 2015. The CEO has a period of five years from his appointment to December 2022 to build up a 200% of base salary shareholding. 2. The number of shares held by Dimitris Lois includes the amount of purchased and vested shares held under the ESPP on 31 December 2017 and 1,000 shares held by Dimitris Lois’s spouse. Dimitris Lois’ heirs exercised 1,700,000 options under ESOP between 2 October and 31 December 2017. 3. As more fully set out at page 118 of the report and following the passing of Dimitris Lois, the Remuneration Committee determined at its meeting in March 2018 that, in line with the terms of the PSP, PSP awards granted to Dimitris Lois in 2015, 2016 and 2017 should vest pro-rated for time and performance up to 2 October 2017. PSP awards therefore vested over in aggregate 396,402 shares. The remainder of the shares subject to PSP awards granted to Dimitris Lois lapsed. The Remuneration Committee further determined that these awards should vest immediately to Dimitris Lois’ heirs. 4. Anastassis David is a beneficiary of: (a) a private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Truad Verwaltungs AG is the Trustee, whereby he has an indirect interest with respect to the 85,355,019 shares held by Kar-Tess Holding S.A. (b) a further private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Selene

Treuhand AG is the Trustee, whereby he has an indirect interest with respect to 823,008 shares held by Selene Treuhand AG. Swiss Statutory Reporting 5. William W. (Bill) Douglas III owns 10,000 Company shares. 6. Anastasios I. Leventis is a beneficiary of: (a) a private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Truad Verwaltungs AG is the Trustee, whereby he has an indirect interest with respect to the 85,355,019 shares held by Kar- Tess Holding S.A. (b) a further private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Selene Treuhand AG is the Trustee, whereby he has an indirect interest with respect to 386,879 shares held by Selene Treuhand AG. (c) a further private discretionary trust for the primary benefit of present and future members of the family of the late Christodoulos Papaneokleus Leventis, of which Mervail Company (PTC) Limited is the Trustee, whereby he has an indirect interest with respect to 623,664 shares held by Carlcan Holding Limited. 7. Christo Leventis is a beneficiary of: (a) a private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Truad Verwaltungs AG is the Trustee, whereby he has an indirect interest with respect to the 85,355,019 shares held by Kar- Tess Holding S.A. (b) a further private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Selene Treuhand AG is the Trustee, whereby he has an indirect interest with respect to 498,545 shares held by Selene Treuhand AG. (c) a further private discretionary trust for the primary benefit of present and future members of the family of the late Christodoulos Papaneokleus Leventis, of which Mervail Company (PTC) Limited is the trustee, whereby he has an indirect interest with respect to 757,307 shares held by Carlcan Holding Limited. Supplementary Information Approval of the Directors’ Remuneration Report The Directors’ Remuneration Report set out on pages 104 to 125 was approved by the Board of Directors on 15 March 2018 and signed on its behalf by Alexandra Papalexopoulou, Chair of the Remuneration Committee.

Alexandra Papalexopoulou Chair of the Remuneration Committee

15 March 2018 Coca-Cola HBC 2017 Integrated Annual Report 125 STATEMENT OF DIRECTORS’ RESPONSIBILITIES​

Statement of Directors’ responsibilities The activities of the Group, together with the factors likely to affect its future development, performance, financial position, cash flows, The Directors are responsible for preparing the Annual Report, liquidity position and borrowing facilities are described in the including the consolidated financial statements, and the Corporate Strategic Report (pages 1 to 70). In addition, Notes 23 ‘Financial risk Governance Report including the Remuneration Report and the management and financial instruments’, 24 ‘Net debt’ and 25 Strategic Report, in accordance with applicable law and regulations. ‘Equity’ include the Company’s objectives, policies and processes The Directors, whose names and functions are set out on pages for managing its capital; its financial risk management objectives; 72 to 75, confirm to the best of their knowledge that: details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group has (a) The Annual Report, taken as a whole, is fair, balanced and considerable financial resources together with long-term contracts understandable, and provides the information necessary for with a number of customers and suppliers across different shareholders to assess the Group’s position and performance, countries. The Directors have also assessed the principal risks and the other matters discussed in connection with the Viability business model and strategy. Statement on page 70. The Directors considered it appropriate (b) The consolidated financial statements, which have been to adopt the going concern basis of accounting in preparing the prepared in accordance with International Financial Reporting annual financial statements and have not identified any material Standards as issued by the IASB, give a true and fair view of the uncertainties to the Group’s ability to continue to do so over a assets, liabilities, financial position and profit or loss of the period of at least 12 months from the date of approval of these Company and the undertakings included in the consolidation of financial statements. the Group taken as a whole. (c) The Annual Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidated Coca-Cola HBC Group taken as a whole, together with a description of the By order of the Board principal risks and uncertainties that they face. Anastassis G. David Chairman of the Board

16 March 2018

Disclosure of information required under Listing Rule 9.8.4R For the purposes of Listing Rule 9.8.4C, the information required to be disclosed by premium listed companies in the United Kingdom is as follows:

Listing Rule Information to be included Reference in report 9.8.4(1) Interest capitalised by the Group and an indication of the amount and treatment of any associated tax relief Not applicable 9.8.4(2) Details of any unaudited financial information required by LR 9.2.18 Not applicable 9.8.4(4) Details of any long-term incentive scheme described in LR 9.4.3 Not applicable 9.8.4(5) Details of any arrangement under which a Director has waived any emoluments Not applicable 9.8.4(6) Details of any arrangement under which a Director has agreed to waive future emoluments Not applicable 9.8.4(7) Details of any allotments of shares by the Company for cash not previously authorised by shareholders Not applicable 9.8.4(8) Details of any allotments of shares for cash by a major subsidiary of the Company Not applicable 9.8.4(9) Details of the participation by the Company in any placing made by its parent company Not applicable 9.8.4(10) Details of any contracts of significance involving a Director Not applicable 9.8.4(11) Details of any contract for the provision of services to the Company by a controlling shareholder Not applicable 9.8.4(12) Details of any arrangement under which a shareholder has waived or agreed to waive any dividends Not applicable 9.8.4(13) Details of any arrangement under which a shareholder has agreed to waive future dividends Not applicable 9.8.4(14) Agreements with a controlling shareholder Not applicable

126 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Contents

Financial Statements 128 Independent Auditor’s Report ​ Consolidated Financial Statements 133 Consolidated Income Statement 134 Consolidated Statement of Comprehensive Income 135 Consolidated Balance Sheet 136 Consolidated Statement of Changes in Equity 138 Consolidated Cash Flow Statement ​ Notes to the Consolidated Financial Statements

​ Basis of reporting Corporate Governance 139 1. Description of business 139 2. Basis of preparation and consolidation 139 3. Foreign currency and translation 140 4. Accounting pronouncements 141 5. Critical accounting estimates and judgements ​ Results for the year 142 6. Segmental analysis 146 7. Net sales revenue 146 8. Operating expenses 148 9. Finance costs, net 148 10. Taxation 151 11. Earnings per share 151 12. Components of other comprehensive income Financial Statements ​ Operating assets and liabilities 152 13. Intangible assets 155 14. Property, plant and equipment 158 15. Interests in other entities 161 16. Inventories 162 17. Trade, other receivables and assets 165 18. Assets classified as held for sale 165 19. Trade and other payables 166 20. Provisions and employee benefits 171 21. Offsetting financial assets and financial liabilities 172 22. Business combinations

​ Risk management and capital structure Swiss Statutory Reporting 173 23. Financial risk management and financial instruments 184 24. Net debt 188 25. Equity ​ Other financial information 190 26. Related party transactions 192 27. Share based payments 195 28. Contingencies 196 29. Commitments 196 30. Post balance sheet events Supplementary Information FINANCIAL STATEMENTS Coca-Cola HBC 2017 Integrated Annual Report 127 INDEPENDENT AUDITOR’S REPORT

Independent auditor’s report to Coca-Cola HBC AG Report on the audit of the consolidated financial statements

Our opinion In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Coca-Cola HBC AG’s (the “Company”) and its subsidiaries (together the “Group”) as at 31 December 2017, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

What we have audited The Group’s consolidated financial statements included within the 2017 Integrated Annual Report comprise: –– the consolidated balance sheet as at 31 December 2017; –– the consolidated income statement for the year then ended; –– the consolidated statement of comprehensive income for the year then ended; –– the consolidated statement of changes in equity for the year then ended; –– the consolidated cash flow statement for the year then ended; and –– the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence We are independent of the Group in accordance with applicable laws and regulations regarding independence relevant to our audit of the consolidated financial statements, including the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code). We have also fulfilled our other ethical responsibilities in accordance with the IESBA Code and other applicable laws and regulations.

Our audit approach

Overview

Overall group materiality: €28.2 million, which represents 5% of profit before tax.

–– We audited the complete financial information of the Company and of subsidiary undertakings in 16 countries. Materiality –– Taken together, the undertakings of which an audit of their complete financial information was performed accounted for 87% of consolidated net sales revenue, 93% of consolidated profit before tax and 88% of consolidated total assets of the Group. –– We also conducted specified audit procedures and analytical review procedures for other Group roup scoping undertakings and functions. Key audit matters, which remain the same as the prior year, comprised: –– Goodwill and indefinite-lived intangible assets impairment assessment. ey audit –– Uncertain tax positions. matters –– Provisions and contingent liabilities.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we looked at where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

128 Coca-Cola HBC 2017 Integrated Annual Report Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality Strategic Report for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Overall group materiality €28.2 million (2016: €22.9 million) How we determined it 5% of profit before tax We chose profit before tax as the benchmark because, in our view, it is one of the principal Rationale for the materiality measures considered by users, and is a generally accepted benchmark. We chose 5% which is within benchmark applied the range of acceptable quantitative materiality thresholds in generally accepted auditing practice.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above €1.0 million as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Corporate Governance

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Goodwill and indefinite-lived intangible assets We evaluated the appropriateness of management’s identification impairment assessment of the Group’s CGUs and the process by which management prepared the CGUs value-in-use calculations which we found to be Refer to Note 13 for intangible assets including goodwill. satisfactory for the purposes of our audit. We tested the

Goodwill and indefinite-lived intangible assets as at 31 December mathematical accuracy of the CGUs value-in-use calculations and Financial Statements 2017 amount to €1,621.2 million and €199.9 million, respectively. compared them to the latest budget approved by the Directors and assessed the quality of the budgeting process by comparing the The above noted amounts have been allocated to individual prior year budget with actual data. cash-generating units (‘CGUs’). The impairment assessment must be performed at least annually and involves the determination of the With the support of our valuation specialists, we challenged recoverable amount, being the higher of the value-in-use and the management’s analysis around the key drivers of cash flow fair value less costs to dispose. forecasts including selling price increases, short-term and long- term volume growth and the level of direct costs by comparing them This area was a key matter for our audit due to the size of goodwill with either the Group’s historical information or market data, as and indefinite-lived intangible assets and because the determination appropriate. We also evaluated the appropriateness of other key of whether elements of goodwill and of indefinite-lived intangible assumptions including discount rates and foreign exchange rates assets are impaired involves complex and subjective estimates and by comparing them to relevant market data. We found the Swiss Statutory Reporting judgements by management about the future results of the CGUs. assumptions to be consistent and in line with our expectations. These estimates and judgements include assumptions surrounding revenue growth rates, direct costs, foreign exchange rates and We also performed sensitivity analyses on the key drivers of cash discount rates. flow forecasts for the CGUs with significant balances of goodwill and indefinite-lived intangible assets as well as for CGUs which remain Furthermore, macroeconomic volatility, competitor activity and sensitive to changes in the key drivers, including the goodwill and regulatory/fiscal developments can adversely affect each CGU and franchise agreements held by the Nigeria CGU. potentially the carrying amount of goodwill and indefinite-lived intangible assets. We assessed the appropriateness and completeness of the related disclosures in Note 13, and consider them to be reasonable. As a No impairment charge was recorded in 2017. Goodwill and franchise result of our work, we found that the determination by management agreements held by the Nigeria CGU have been determined by that no impairment was required for goodwill and indefinite-lived Supplementary Information management to remain sensitive to changes in the key drivers of intangible assets was supported by assumptions within cash flow forecasts given the macroeconomic volatility in Nigeria. reasonable ranges.

Coca-Cola HBC 2017 Integrated Annual Report 129 INDEPENDENT AUDITOR’S REPORT CONTINUED

Key audit matter How our audit addressed the key audit matter Uncertain tax positions We evaluated the related accounting policy for provisioning for tax Refer to Note 10 for taxation and Note 28 for contingencies. exposures and found it to be appropriate. The Group operates in a complex multinational tax environment In conjunction with our tax specialists, we evaluated management’s which gives rise to uncertain tax positions in relation to corporation judgements in respect of estimates of tax exposures and tax, transfer pricing and indirect taxes. As at 31 December 2017, the contingencies in order to assess the adequacy of the Group’s tax Group has current tax liabilities of €97.5 million which include €69.2 provisions. In order to understand and evaluate management’s million of provisions for tax uncertainties. judgements, we considered the status of current tax authority audits and enquiries, the outcome of previous tax authority audits, The Group establishes provisions based on management’s judgemental positions taken in tax returns and current year judgements of the probable amount of the liability. Given the estimates and recent developments in the tax environments in number of judgements involved in estimating the provisions relating which the Group operates. to uncertain tax positions and the complexities of dealing with tax rules and regulations in numerous jurisdictions, this was considered We challenged management’s key assumptions, in particular on as a key audit matter. cases where there had been significant developments with tax authorities, noting no significant deviation from our expectations. From the evidence obtained and in the context of the consolidated financial statements, taken as a whole, we consider the provisions in relation to uncertain tax positions as at 31 December 2017 to be appropriate. Provisions and contingent liabilities We evaluated the design of, and tested, key controls in respect Refer to Note 20 for provisions and Note 28 for contingencies. of litigation and regulatory procedures, which we found to be satisfactory for the purposes of our audit. The Group faces a number of threatened and actual legal and regulatory proceedings. The determination of the provision and/or Our procedures included the following: the level of disclosure required involves a high degree of judgement –– where relevant, reading external legal advice obtained by resulting in provisions and contingent liabilities being considered management; as a key audit matter. –– discussing open matters with the Group general counsel; –– meeting with local management and reading subsequent correspondence; –– assessing and challenging management’s conclusions through understanding precedents set in similar cases; and –– circularising relevant third-party legal representatives and follow up discussions, where appropriate, on certain material cases. On the basis of the work performed, whilst noting the inherent uncertainty with such legal and regulatory matters, we determined the relevant provisions as at 31 December 2017 to be appropriate. We assessed the appropriateness of the related disclosures in Note 28 and considered these to be reasonable.

How we tailored our group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group operates through its trading subsidiary undertakings in 28 countries, as set out on page 142 of the 2017 Integrated Annual Report. The processing of the accounting entries for these entities is largely centralised in a shared services centre in Bulgaria, except for the subsidiary undertakings in Russia, Ukraine, Belarus and Armenia, which process their accounting entries locally. The Group also operates a centralised treasury function in the Netherlands and in Greece and a centralised procurement function in Austria. We considered the nature of the work that needed to be performed on these entities and functions by us, as the group engagement team and by component auditors from other PwC network firms. Where work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those entities or functions to be able to conclude whether appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. Based on the significance to the consolidated financial statements and in light of the key audit matters as noted above, we identified subsidiary undertakings in 16 countries (including the trading subsidiary undertakings in Russia, Nigeria and Italy) which in our view, required an audit of their complete financial information. Furthermore, the Company’s complete financial information was subject to audit. Specified audit procedures on certain balances and transactions were also performed on one joint venture and the corporate service centres in Greece and Austria. In addition, audit procedures were performed with respect to the centralised treasury function by the group engagement team and by the component audit team in Austria as regards to the centralised procurement function. The group engagement team also performed analytical review and other procedures on balances and transactions of subsidiary undertakings not covered by the procedures described above.

130 Coca-Cola HBC 2017 Integrated Annual Report Our group engagement team’s involvement with respect to audit work performed by component auditors included site visits (to Russia, Nigeria, Italy, Switzerland, Romania, Poland, Austria Bulgaria and Greece), conference calls with component audit teams, meetings with local management, review of component auditor work papers, attendance at component audit clearance meetings, and other forms of interactions as considered necessary depending on the significance of the component and the extent of accounting and audit issues arising. The group engagement team was also responsible for planning, designing and overseeing the audit procedures performed at the

shared services centre in Bulgaria. The Group consolidation, financial statement disclosures and a number of areas of significant Strategic Report judgement, including goodwill and intangible assets, material provisions and contingent liabilities, were audited by the group engagement team. We also performed work centrally on IT general controls. This year, we held a two-day audit planning workshop in Bulgaria focusing on planning and risk assessment activities, auditor independence, centralised testing procedures and implementation of new IFRSs. This audit planning workshop was attended by the component teams responsible for the subsidiaries requiring an audit of their complete financial information. Based on the above, the undertakings of which an audit of their complete financial information was performed accounted for 87% of consolidated net sales revenue, 93% of consolidated profit before tax and 88% of consolidated total assets of the Group.

Other information The Directors are responsible for the other information. The other information comprises Coca-Cola HBC AG’s 2017 Integrated Annual

Report (but does not include the consolidated financial statements, our auditor’s report thereon and the Swiss statutory reporting), which Corporate Governance we obtained prior to the date of this auditor’s report. Our opinion on the consolidated financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report on these responsibilities.

UK Corporate Governance Code provisions Financial Statements We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s compliance with the UK Corporate Governance Code (the “Code”) does not properly disclose a departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditor.

The Directors’ statement on going concern We have reviewed the statement on going concern, included in the Statement of Directors’ Responsibilities, in Coca-Cola HBC AG’s 2017 Integrated Annual Report on page 126, as if the Company were a UK incorporated premium listed entity. We have nothing to report having performed our review. As noted in the Statement of Directors’ Responsibilities, the Directors have concluded that it is appropriate to prepare the consolidated financial statements using the going concern basis of accounting. The going concern basis presumes that the Group has adequate Swiss Statutory Reporting resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the consolidated financial statements were signed. As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability to continue as a going concern.

The Directors’ assessment of the prospects of the Group We have also reviewed the Directors’ statement in relation to the longer-term viability of the Group, set out on page 70, of the Coca-Cola HBC’s 2017 Integrated Annual Report as if the Company were a UK incorporated premium listed entity. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of the Code; and considering whether the statement is consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review. Supplementary Information

Responsibilities of the Directors for the consolidated financial statements As explained more fully in the Statement of Directors’ Responsibilities set out in the 2017 Integrated Annual Report on page 126, the Directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Coca-Cola HBC 2017 Integrated Annual Report 131 INDEPENDENT AUDITOR’S REPORT CONTINUED

Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: –– Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. –– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. –– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. –– Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. –– Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. –– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Those charged with governance are responsible for overseeing the Group’s financial reporting process. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Use of this report This report, including the opinion, has been prepared for and only for Coca-Cola HBC AG for the purpose of the Disclosure Guidance and Transparency Rules sourcebook and the Listing Rules of the Financial Conduct Authority and for no other purpose.

Marios Psaltis the Certified Auditor, Reg. No. 38081 for and on behalf of PricewaterhouseCoopers S.A. Certified Auditors, Reg. No. 113 Athens, Greece 16 March 2018

Notes: (a) The maintenance and integrity of the Coca-Cola HBC AG website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the consolidated financial statements since they were initially presented on the website. (b) Legislation in UK and Switzerland governing the preparation and dissemination of consolidated financial statements may differ from legislation in other jurisdictions.

132 Coca-Cola HBC 2017 Integrated Annual Report FINANCIAL STATEMENTS

Consolidated income statement Strategic Report

For the year ended 31 December ​ ​ 2017 2016 ​ Note € million € million Net sales revenue 6,7 6,522.0 6,219.0 Cost of goods sold ​ (4,083.0) (3,920.2) Gross profit ​ 2,439.0 2,298.8 ​ ​ ​ ​ Operating expenses 8 (1,849.2) (1,792.5) Operating profit 6 589.8 506.3

​ ​ ​ ​ Corporate Governance Finance income ​ 10.6 7.4 Finance costs ​ (47.3) (69.7) Finance costs, net 9 (36.7) (62.3) Share of results of equity method investments 15 11.8 13.8 Profit before tax ​ 564.9 457.8 ​ ​ ​ ​ Tax 10 (138.4) (113.8) Profit after tax ​ 426.5 344.0 ​ ​ ​ ​ Attributable to: ​ ​ ​

Owners of the parent ​ 426.0 343.5 Financial Statements Non-controlling interests ​ 0.5 0.5 ​ ​ 426.5 344.0 ​ ​ ​ ​ Basic earnings per share (€) 11 1.17 0.95 Diluted earnings per share (€) 11 1.16 0.95

The accompanying notes form an integral part of these consolidated financial statements. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 133 FINANCIAL STATEMENTS CONTINUED

Consolidated statement of comprehensive income

For the year ended 31 December ​ 2017 2016 ​ € million € million Profit after tax ​ 426.5 ​ 344.0 Other comprehensive income: ​ ​ ​ ​ Items that may be subsequently reclassified to income statement: ​ ​ ​ ​ Available-for-sale financial assets: ​ ​ ​ ​ Valuation gain / (loss) during the year ​ 0.1 ​ (0.1) Cash flow hedges: ​ ​ ​ ​ Net losses during the year (7.0) ​ (48.2) ​ Net losses reclassified to income statement for the year 6.3 ​ 12.8 ​ Transfers to inventory for the year 9.3 8.6 4.1 (31.3) Foreign currency translation ​ (219.2) ​ (112.9) Share of other comprehensive income of equity method investments ​ (5.3) ​ (7.5) Income tax relating to items that may be subsequently reclassified to income statement (refer to Note 12) ​ (0.3) ​ 1.1 ​ ​ (216.1) ​ (150.7) Items that will not be subsequently reclassified to income statement: ​ ​ ​ ​ Actuarial gains / (losses) ​ 6.9 ​ (41.7) Income tax relating to items that will not be subsequently reclassified to income statement (refer to Note 12) ​ (2.2) ​ 7.0 ​ ​ 4.7 ​ (34.7) Other comprehensive loss for the year, net of tax (refer to Note 12) ​ (211.4) ​ (185.4) Total comprehensive income for the year ​ 215.1 ​ 158.6 ​ ​ ​ ​ ​ Total comprehensive income attributable to: ​ ​ ​ ​ Owners of the parent ​ 214.6 ​ 158.1 Non-controlling interests ​ 0.5 ​ 0.5 ​ ​ 215.1 ​ 158.6

The accompanying notes form an integral part of these consolidated financial statements.

134 Coca-Cola HBC 2017 Integrated Annual Report Consolidated balance sheet Strategic Report

As at 31 December ​ 2017 2016 ​ Note € million € million Assets ​ ​ ​ Intangible assets 13 1,829.9 1,885.7 Property, plant and equipment 14 2,322.0 2,406.6 Equity method investments 15 96.8 117.0 Derivative financial instruments 23 4.4 8.1 Deferred tax assets 10 59.1 57.5

Other non-current assets 17 32.4 28.7 Corporate Governance Total non-current assets ​ 4,344.6 4,503.6 ​ ​ ​ ​ Inventories 16 416.8 431.5 Trade, other receivables and assets 17 966.8 1,030.8 Other financial assets 24 150.9 – Derivative financial instruments 23 12.0 7.9 Current tax assets ​ 12.3 6.1 Cash and cash equivalents 24 723.5 573.2 ​ ​ 2,282.3 2,049.5 Assets classified as held for sale 18 3.3 11.8

Total current assets ​ 2,285.6 2,061.3 Financial Statements Total assets ​ 6,630.2 6,564.9 ​ ​ ​ ​ Liabilities ​ ​ ​ Borrowings 24 166.4 156.5 Derivative financial instruments 23 4.5 14.2 Trade and other payables 19 1,544.4 1,587.3 Provisions and employee benefits 20 83.6 118.6 Current tax liabilities ​ 97.5 91.5 Total current liabilities ​ 1,896.4 1,968.1 ​ ​ ​ ​ Borrowings 24 1,459.8 1,468.1 Swiss Statutory Reporting Derivative financial instruments 23 0.9 1.3 Deferred tax liabilities 10 134.0 124.1 Provisions and employee benefits 20 120.2 125.0 Other non-current liabilities ​ 6.7 8.2 Total non-current liabilities ​ 1,721.6 1,726.7 Total liabilities ​ 3,618.0 3,694.8 ​ ​ ​ ​ Equity ​ ​ ​ Share capital 25 2,015.1 1,990.8

Share premium 25 4,739.3 4,854.6 Supplementary Information Group reorganisation reserve 25 (6,472.1) (6,472.1) Treasury shares 25 (71.3) (70.7) Exchange equalisation reserve 25 (1,026.3) (801.8) Other reserves 25 271.2 245.1 Retained earnings ​ 3,551.5 3,119.7 Equity attributable to owners of the parent ​ 3,007.4 2,865.6 Non-controlling interests ​ 4.8 4.5 Total equity ​ 3,012.2 2,870.1 Total equity and liabilities ​ 6,630.2 6,564.9 The accompanying notes form an integral part of these consolidated financial statements.

Coca-Cola HBC 2017 Integrated Annual Report 135 FINANCIAL STATEMENTS CONTINUED

Consolidated statement of changes in equity ​ Attributable to owners of the parent Group Exchange Non- Share Share reorganisation Treasury equalisation Other Retained controlling Total capital premium reserve shares reserve reserves earnings Total interests equity ​ € million € million € million € million € million € million € million € million € million € million Balance as 1 January 2016 2,000.1 5,028.3 (6,472.1) (132.0) (681.4) 260.4 2,816.5 2,819.8 4.3 2,824.1 Shares issued to employees exercising stock options 9.1 12.5 – – – – – 21.6 – 21.6 Share-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options and performance shares – – – – – 8.1 – 8.1 – 8.1 Movement in shares held for equity compensation plan – – – (0.4) – – – (0.4) – (0.4) Sale of own shares – – – 3.1 – – – 3.1 – 3.1 Cancellation of shares (18.4) (40.1) – 58.5 – – – – – – Appropriation of reserves – – – 0.1 – 6.9 (7.0) – – – Dividends – (146.1) – – – – 1.4 (144.7) (0.3) (145.0) ​ 1,990.8 4,854.6 (6,472.1) (70.7) (681.4) 275.4 2,810.9 2,707.5 4.0 2,711.5 Profit for the year net of tax ​ – – – ​ ​ 343.5 343.5 0.5 344.0 Other comprehensive loss for the year, net of tax ​ – – – (120.4) (30.3) (34.7) (185.4) – (185.4) Total comprehensive income for the year, net of tax1 ​ – – – (120.4) (30.3) 308.8 158.1 0.5 158.6 Balance as at 31 December 2016 1,990.8 4,854.6 (6,472.1) (70.7) (801.8) 245.1 3,119.7 2,865.6 4.5 2,870.1

1. The amount included in the exchange equalisation reserve of €120.4m loss for 2016 represents the exchange loss attributed to the owners of the parent, including €7.5m loss relating to share of other comprehensive income of equity method investments. The amount included in other reserves of €30.3m loss for 2016 consists of loss on valuation of available-for-sale financial assets of €0.1m, cash flow hedges losses of €31.3m and the deferred tax income thereof amounting to €1.1m. The amount of €308.8m gain comprises profit for the year of €343.5m, less actuarial losses of €41.7m, plus a deferred tax income of €7.0m. The amount of €0.5m gain included in non-controlling interests for 2016 represents the share of non-controlling interests in profit for the year. The accompanying notes form an integral part of these consolidated financial statements.

136 Coca-Cola HBC 2017 Integrated Annual Report ​ Attributable to owners of the parent Strategic Report Group Exchange Non- Share Share reorganisation Treasury equalisation Other Retained controlling Total capital premium reserve shares reserve reserves earnings Total interests equity ​ € million € million € million € million € million € million € million € million € million € million Balance as at 1 January 2017 1,990.8 4,854.6 (6,472.1) (70.7) (801.8) 245.1 3,119.7 2,865.6 4.5 2,870.1 Shares issued to employees exercising stock options 24.3 46.7 – – – – – 71.0 – 71.0 Share-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options and performance shares – – – – – 17.2 – 17.2 – 17.2 Movement in shares held for

equity compensation plan – – – (0.6) – 0.1 – (0.5) – (0.5) Corporate Governance Appropriation of reserves – – – – – 0.4 (0.4) – – – Dividends – (162.0) – – – – 1.5 (160.5) (0.2) (160.7) ​ 2,015.1 4,739.3 (6,472.1) (71.3) (801.8) 262.8 3,120.8 2,792.8 4.3 2,797.1 Profit for the year net of tax – – – – – – 426.0 426.0 0.5 426.5 Other comprehensive loss for the year, net of tax – – – – (224.5) 8.4 4.7 (211.4) – (211.4) Total comprehensive income for the year, net of tax2 – – – – (224.5) 8.4 430.7 214.6 0.5 215.1 Balance as at 31 December 2017 2,015.1 4,739.3 (6,472.1) (71.3) (1,026.3) 271.2 3,551.5 3,007.4 4.8 3,012.2

2. The amount included in the exchange equalisation reserve of €224.5m loss for 2017 represents the exchange loss attributed to the owners of the parent, including Financial Statements €5.3m loss relating to share of other comprehensive income of equity method investments. The amount included in other reserves of €8.4m gain for 2017 consists of gain on valuation of available-for-sale financial assets of €0.1m, cash flow hedges gains of €8.6m and the deferred tax expense thereof amounting to €0.3m. The amount of €430.7m gain comprises profit for the year of €426.0m, plus actuarial gains of €6.9m, minus deferred tax expense of €2.2m. The amount of €0.5m gain included in non-controlling interests for 2017 represents the share of non-controlling interests in profit for the year. For further details, refer to: Note 25 Equity and Note 27 Share based payments. The accompanying notes form an integral part of these consolidated financial statements. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 137 FINANCIAL STATEMENTS CONTINUED

Consolidated cash flow statement

For the year ended 31 December ​ ​ 2017 2016 ​ Note €million €million Operating activities ​ ​ ​ Profit after tax ​ 426.5 344.0 Finance costs, net 9 36.7 62.3 Share of results of equity method investments 15 (11.8) (13.8) Tax charged to the income statement 10 138.4 113.8 Depreciation of property, plant and equipment 14 300.7 305.5 Impairment of property, plant and equipment 14 16.1 26.9 Employee stock options and performance shares 27 20.8 8.1 Amortisation of intangible assets 13 0.4 0.4 Other non-cash items ​ (0.3) (1.3) ​ ​ 927.5 845.9 Gain on disposals of non-current assets 8 (4.3) (2.9) (Increase) / Decrease in inventories ​ (13.1) 3.8 Decrease / (Increase) in trade and other receivables ​ 11.7 (122.6) Increase in trade and other payables ​ 10.1 131.2 Tax paid ​ (128.4) (92.1) Net cash inflow from operating activities ​ 803.5 763.3 ​ ​ ​ ​ Investing activities ​ ​ ​ Payments for purchases of property, plant and equipment ​ (409.9) (347.8) Payments for purchases of intangible assets 13 (1.8) – Proceeds from sales of property, plant and equipment ​ 39.5 35.9 Net receipts from equity investments ​ 24.4 17.8 Net payments for investments in financial assets 23​ (151.0) – Proceeds from loans to related parties ​ 1.6 2.8 Interest received ​ 7.1 7.3 Payments for acquisition of subsidiary 22 – (19.5) Net cash outflow from investing activities ​ (490.1) (303.5) ​ ​ ​ ​ Financing activities ​ ​ ​ Proceeds from shares issued to employees exercising stock options 25 71.0 21.6 Purchase of shares from non-controlling interests ​ (0.5) (0.7) Proceeds from sale of own shares ​ – 3.1 Dividends paid to owners of the parent 25 (160.5) (144.7) Dividends paid to non-controlling interests ​ (0.2) (0.3) Proceeds from borrowings ​ 82.2 679.6 Repayments of borrowings ​ (83.8) (738.2) Principal repayments of finance lease obligations ​ (7.2) (20.2) Payments for settlement of derivatives and forward starting swaps ​ (3.1) (55.4) Interest paid ​ (36.9) (72.8) Net cash outflow from financing activities ​ (139.0) (328.0) Net increase in cash and cash equivalents ​ 174.4 131.8 ​ ​ ​ ​ Movement in cash and cash equivalents ​ ​ ​ Cash and cash equivalents at 1 January ​ 573.2 487.4 Net increase in cash and cash equivalents ​ 174.4 131.8 Effect of changes in exchange rates ​ (24.1) (46.0) Cash and cash equivalents at 31 December 24 723.5 573.2

The accompanying notes form an integral part of these consolidated financial statements.

138 Coca-Cola HBC 2017 Integrated Annual Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Description of business Strategic Report Coca-Cola HBC AG and its subsidiaries (the ‘Group’ or ‘Coca-Cola HBC’ or ‘the Company’) are principally engaged in the production, sales and distribution of non-alcoholic ready-to-drink beverages, under franchise from The Coca-Cola Company. The Company distributes its products in Nigeria and 27 countries in Europe. Information on the Company’s operations by segment is included in Note 6. On 11 October 2012, Coca-Cola HBC, a Swiss stock corporation (Aktiengesellschaft/Société Anonyme) incorporated by Kar-Tess Holding (a related party of the Group, see Note 26), announced a voluntary share exchange offer to acquire all outstanding ordinary registered shares and all American depositary shares of Coca-Cola Hellenic Bottling Company S.A. As a result of the successful completion of this offer, on 25 April 2013 Coca-Cola HBC acquired 96.85% of the issued Coca-Cola Hellenic Bottling Company S.A. shares, including shares represented by American depositary shares, and became the new parent company of the Group. On 17 June 2013, Coca-Cola HBC completed its statutory buy-out of the remaining shares of Coca-Cola Hellenic Bottling Company S.A. that it did not acquire upon completion of its voluntary share exchange offer. Consequently, Coca-Cola HBC acquired 100% of Coca-Cola Hellenic Bottling Company S.A. which was eventually delisted from the Athens Exchange, from the London Stock Exchange where it had a secondary listing and from Corporate Governance the New York Stock Exchange where American depositary shares were listed. The shares of Coca-Cola HBC started trading in the premium segment of the London Stock Exchange (Ticker symbol: CCH), on the Athens Exchange (Ticker symbol: EEE) and regular way trading in Coca-Cola HBC ADS commenced on the New York Stock Exchange (Ticker symbol: CCH) on 29 April 2013. On 24 July 2014 the Group proceeded to the delisting of its American Depository Receipts from the New York Stock Exchange and terminated its reporting obligations under the US Securities Exchange Act of 1934. The deregistration of Coca-Cola HBC shares under the US Securities Exchange Act of 1934 and the termination of its reporting obligations became effective on 3 November 2014.

2. Basis of preparation and consolidation

Basis of preparation Financial Statements The consolidated financial statements included in this document are prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’). The consolidated financial statements are prepared on a going concern basis under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and derivative financial instruments. These consolidated financial statements were approved for issue by the Board of Directors on 15 March 2018 and are expected to be verified at the Annual General Meeting to be held on 11 June 2018.

Basis of consolidation

Subsidiary undertakings are those companies over which the Group, directly or indirectly, has control. The Group controls an entity when Swiss Statutory Reporting the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. Subsidiary undertakings are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Inter-company transactions and balances between Group companies are eliminated. The subsidiaries’ accounting policies are consistent with policies adopted by the Group. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when such control is

lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of Supplementary Information subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

3. Foreign currency and translation The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Euro, which is the presentation currency for the consolidated financial statements.

Coca-Cola HBC 2017 Integrated Annual Report 139 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3. Foreign currency and translation continued The assets and liabilities of foreign subsidiaries are translated into Euro at the exchange rate ruling at the balance sheet date. The results of foreign subsidiaries are translated into Euro using the average monthly exchange rate (being a reasonable approximation of the rates prevailing on the transaction dates). The exchange differences arising on translation are recognised in other comprehensive income. On disposal of a foreign entity, accumulated exchange differences are recognised as a component of the gain or loss on disposal. Transactions in foreign currencies are recorded at the rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are remeasured at the rate of exchange ruling at the balance sheet date. All gains and losses arising on remeasurement are included in the income statement, except for exchange differences arising on assets and liabilities classified as cash flow hedges which are deferred in equity until the occurrence of the hedged transaction, at which time they are recognised in the income statement. Share capital denominated in a currency other than the functional currency is initially stated at spot rate of the date of issue but is not retranslated. The principal exchange rates used for translation purposes in respect of one Euro are:

Average Average Closing Closing ​ 2017 2016 2017 2016 US dollar 1.13 1.11 1.19 1.04 UK sterling 0.88 0.82 0.89 0.85 Polish zloty 4.26 4.36 4.19 4.40 Nigerian naira 378.60 279.97 428.75 317.95 Hungarian forint 309.20 311.40 310.12 309.22 Swiss franc 1.11 1.09 1.17 1.07 Russian rouble 65.87 74.36 68.67 64.72 Romanian leu 4.57 4.49 4.65 4.54 Ukrainian hryvnia 29.97 28.27 33.12 27.97 Czech koruna 26.34 27.03 25.93 27.02 Serbian dinar 121.45 123.08 118.29 123.30

4. Accounting pronouncements a) Accounting pronouncements adopted in 2017 In the current period, the Group has adopted the following amendments which were issued by the IASB, that are relevant to its operations and effective for accounting periods beginning on 1 January 2017: –– Amendments to IAS 7: Disclosure initiative –– Amendments to IAS 12: Recognition of deferred tax assets for unrealised losses –– Amendments to IFRS 12: Disclosure of interests in other entities The adoption of these amendments did not have any impact on amounts recognised in the current period or any prior period and are not likely to affect future periods. However, the amendment to IAS 7 requires disclosure of changes in liabilities arising from financing activities, refer to Note 24. b) Accounting pronouncements not yet adopted At the date of approval of these consolidated financial statements, the following standards and interpretations relevant to the Group’s operations were issued but not yet effective and not early adopted. IFRS 15, Revenue from Contracts with Customers that will replace IAS 18, which covers contracts for goods and services, and IAS 11, which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service is transferred to a customer. IFRS 15 is effective for annual periods beginning on or after 1 January 2018. Management has carried out an assessment of the impact of adopting the new standard focusing on areas such as: identification of material rights that should be accounted for as performance obligations and consideration paid to customers. Management has concluded that adoption of the new standard will not have a material impact on the Group’s financial statements.

140 Coca-Cola HBC 2017 Integrated Annual Report IFRS 9, Financial Instruments, which reflects all phases of the financial instruments project and replaces IAS 39, Financial Instruments: Strategic Report Recognition and Measurement. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. Management has assessed the effect of adopting the new standard on the Group’s financial statements and has concluded that neither the new requirements related to the classification and measurement nor the ones related to impairment will have a material impact to the financial statements although may impact disclosures. The new hedge accounting requirements will align the accounting for hedging instruments more closely with the Group’s risk management practices and therefore more hedge relationships are expected to be eligible for hedge accounting. Furthermore, changes in time value of option contracts will in future be deferred in a new ‘costs of hedging’ reserve within equity. The deferred amounts will be recognised against the related hedged transaction when it occurs. The Group will apply the new rules retrospectively from 1 January 2018, with the practical expedients permitted under the standard. IFRS 16, Leases. The new standard supersedes IAS 17 and its objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. IFRS 16 introduces a single lessee accounting model and requires a lessee to Corporate Governance recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. The Group is currently evaluating the impact IFRS 16 will have on its consolidated financial statements. In addition, the following amendments have been issued by the IASB but are not yet effective. The Group is currently evaluating the impact these amendments will have on its consolidated financial statements: –– Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions –– Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an investor and its associate or joint venture –– Interpretation 22: Foreign Currency Transactions and Advance Consideration –– Annual improvements to IFRSs: 2014-2016 Cycle – IAS 28

–– Annual improvements to IFRSs: 2015-2017 Cycle Financial Statements –– Interpretation 23: Uncertainty over income tax treatments

5. Critical accounting estimates and judgements In conformity with IFRS, the preparation of the consolidated financial statements for Coca-Cola HBC requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although these estimates and judgements are based on management’s knowledge of current events and actions that may be undertaken in the future, actual results may ultimately differ from estimates.

Estimates Swiss Statutory Reporting –– Income taxes (Refer to Note 10) –– Impairment of goodwill and indefinite lived intangible assets (Refer to Note 13) –– Employee benefits – defined benefit pension plans (Refer to Note 20)

Judgements –– Joint arrangements (Refer to Note 15)​ Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 141 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

6. Segmental analysis The Group has one business, being the production, sale and distribution of ready-to-drink, primarily non-alcoholic, beverages. The Group operates in 28 countries which are aggregated in reportable segments as follows:

Established markets: Austria, Cyprus, Greece, Italy, Northern Ireland, the Republic of Ireland and Switzerland. Developing markets: Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. Emerging markets: Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, FYROM, Moldova, Montenegro, Nigeria, Romania, the Russian Federation, Serbia (including the Republic of Kosovo) and Ukraine.

The Group’s operations in each of the three reportable segments have been aggregated on the basis of their similar economic characteristics, assessed by reference to their net sales revenue per unit case as well as disposable income per capita, exposure to political and economic volatility, regulatory environments, customers and distribution infrastructures. The accounting policies of the reportable segments are the same as those adopted by the Group. The Group’s chief operating decision maker is its Operating Committee, which evaluates performance and allocates resources based on volume, net sales revenue and operating profit. a) Volume and net sales revenue The Group sales volume in million unit cases1 for the years ended 31 December was as follows:

​ 2017 2016 Established 613.3 606.6 Developing 394.2 383.5 Emerging 1,096.6 1,067.8 Total volume 2,104.1 2,057.9

1. One unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. Volume data is derived from unaudited operational data. Net sales revenue per reportable segment for the years ended 31 December is presented in the graphs below:

2017 €6,522.0m €6,219.0m

E €2,436.3m E D €1,173.4m D E €2,912.3m E

142 Coca-Cola HBC 2017 Integrated Annual Report There are no material amounts of sales or transfers between the Group’s segments nor are there any customers who represent more Strategic Report than 10% of net sales revenue for the Group. In addition to non-alcoholic, ready-to-drink beverages (‘NARTD’), the Group sells and distributes premium spirits. An analysis of volume and net sales revenue per product type for the years ended 31 December is presented below:

Volume in million unit cases1: 2017 2016 NARTD2 2,101.3 2,055.5 Premium Spirits1 2.8 2.4 Total volume 2,104.1 2,057.9 ​ ​ ​ Net sales revenue in € million: ​ ​

NARTD 6,295.2 6,040.6 Corporate Governance Premium Spirits 226.8 178.4 Total net sales revenue 6,522.0 6,219.0

1. One unit case corresponds to approximately 5.678 litres or 24 servings, being a typically used measure of volume. Volume data is derived from unaudited operational data. For premium spirits volume, one case corresponds to 5.678 litres. 2. NARTD: non-alcoholic, ready-to-drink beverages. Net sales revenue from external customers attributed to Switzerland (the Group’s country of domicile), Russia, Italy and Nigeria was as follows for the years ended 31 December:

2017 2016 ​ € million € million Switzerland 416.3 423.6

Russia 1,117.6 983.0 Financial Statements Italy 880.6 897.7 Nigeria​ 532.8​ 583.3​ All countries, other than Switzerland, Russia, Italy and Nigeria 3,574.7 3,331.4 Total net sales revenue from external customers 6,522.0 6,219.0 Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 143 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

6. Segmental analysis continued b) Other income statement items 2017 2016 Year ended 31 December Note € million € million Operating profit: ​ ​ ​ Established ​ 238.3 236.8 Developing ​ 91.6 92.9 Emerging ​ 259.9 176.6 Total operating profit ​ 589.8 506.3 ​ ​ ​ ​ Interest expense and other finance costs: ​ ​ ​ Established ​ (25.4) (40.1) Developing ​ (4.3) (4.9) Emerging ​ (12.9) (8.9) Corporate3 ​ (99.4) (133.2) Inter-segment interest expense ​ 94.7 117.4 Interest expense and other finance costs 9 (47.3) (69.7) ​ ​ ​ ​ Finance income: ​ ​ ​ Established ​ 0.6 0.5 Developing ​ 1.3 1.7 Emerging ​ 23.9 21.5 Corporate3 ​ 79.5 101.1 Inter-segment finance income ​ (94.7) (117.4) Total finance income 9 10.6 7.4 ​ ​ ​ ​ Income tax expense: ​ ​ ​ Established ​ (57.6) (49.7) Developing ​ (17.2) (19.0) Emerging ​ (45.4) (35.7) Corporate3 ​ (18.2) (9.4) Total income tax expense 10 (138.4) (113.8) ​ ​ ​ ​ Reconciling items: ​ ​ ​ Share of results of equity method investments 15 11.8 13.8 Profit after tax ​ 426.5 344.0

Depreciation and impairment of property, plant and equipment and amortisation of intangible assets included in the measure of operating profit, are as follows:

2017 2016 ​ Note € million € million Depreciation and impairment of property, plant and equipment: ​ ​ ​ Established ​ (93.4) (95.8) Developing ​ (52.2) (56.6) Emerging ​ (171.2) (180.0) Total depreciation and impairment of property, plant and equipment 14 (316.8) (332.4) Amortisation of intangible assets: ​ ​ ​ Emerging ​ (0.4) (0.4) Total amortisation of intangible assets 13 (0.4) (0.4)

3. Corporate refers to holding, finance and other non-operating subsidiaries of the Group.

144 Coca-Cola HBC 2017 Integrated Annual Report c) Other items Strategic Report The balance of non-current assets4 attributed to Switzerland (the Group’s country of domicile), Russia, Italy and Nigeria was as follows for the year ended 31 December:

2017 2016 ​ € million € million Switzerland 497.9 546.0 Russia 542.2 578.0 Italy 979.4 990.7 Nigeria​ 388.7​ 439.9​ All countries, other than Switzerland, Russia, Italy and Nigeria 1,768.8 1,759.3 Total non-current assets4 4,177.0 4,313.9 Corporate Governance 4. Excluding financial instruments, equity method investments and deferred tax assets. Expenditure of property, plant and equipment per reportable segment was as follows for the year ended 31 December:

2017 2016 ​ € million € million Established 89.7 94.7 Developing 63.2 44.3 Emerging 257.0 208.8 Total expenditure of property, plant and equipment 409.9 347.8

During 2016 and 2017 the Nigerian naira was significantly devalued against the Euro, resulting in foreign currency translation losses which were recognised within other comprehensive income of the consolidated statement of comprehensive income in both 2016 and 2017 Financial Statements (refer to Note 12). The Group continues to monitor the situation in Nigeria in order to ensure that timely actions and initiatives are undertaken to minimise potential adverse impact on its performance, particularly in relation to the currency volatility. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 145 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

7. Net sales revenue

Accounting policy Net sales revenue is recognised when all of the following conditions are met: when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the Group; and when the significant risks and rewards of ownership of the products have passed to the buyer, usually on delivery of goods. Net sales revenue is measured at the fair value of the consideration received or receivable and is stated net of sales discounts, as well as listing fees and marketing and promotional incentives provided to customers. Net sales revenue includes excise and other duties where the Group pays as principal but excludes amounts collected on behalf of third parties, such as value added taxes. Listing fees are incentives provided to customers for carrying the Group’s products in their stores. Listing fees that are subject to contract-based term arrangements are capitalised and amortised over the term of the contract as a reduction to revenue. All other listing fees as well as marketing and promotional incentives are a reduction of revenue as incurred. Coca-Cola HBC receives contributions from The Coca-Cola Company in order to promote sales of their brands. Contributions for price support, marketing and promotional campaigns in respect of specific customers are recognised as an offset to promotional incentives provided to those customers to which the contributions contractually relate. These contributions are accrued and matched to the expenditure to which they relate (refer to Note 26).

Refer to Note 6 for an analysis of net sales revenue per reportable segment. Listing fees and marketing and promotional incentives provided to customers recognised as a reduction to net sales revenue for the year ended 31 December are presented below:

2017 2016 ​ € million € million Listing fees 474.2 485.9 Marketing and promotional incentives 210.2 216.6 Total listing fees, marketing and promotional incentives 684.4 702.5

The amount of listing fees capitalised at 31 December 2017 was €7.9m (31 December 2016: €11.0m). Of this balance, €6.0m (31 December 2016: €7.9m) was classified as current prepayments and the remainder as non-current prepayments.

8. Operating expenses

Accounting policy Restructuring expenses are recorded in a separate line item within operating expenses and comprise costs arising from significant changes in the way the Group conducts its business such as significant supply chain infrastructure changes, outsourcing of activities and centralisation of processes. Redundancy provisions are recognised only when the Group has a present constructive obligation, which is when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, as well as an appropriate timeline and the employees affected have been notified of the plan’s main features. a) Operating expenses Operating expenses for the year ended 31 December comprised:

2017 2016 ​ € million € million Selling expenses 917.2 869.9 Delivery expenses 495.7 483.1 Administrative expenses 407.4 401.8 Restructuring expenses 28.9 37.7 Operating expenses 1,849.2 1,792.5

In 2017, operating expenses included net gains on disposal of property, plant and equipment of €4.3m (2016: €2.9m net gains).

146 Coca-Cola HBC 2017 Integrated Annual Report Restructuring expenses Strategic Report As part of the effort to optimise its cost base and sustain competitiveness in the marketplace, the Company undertakes restructuring initiatives. The restructuring concerns mainly employees’ costs and impairment of property, plant and equipment (refer to Note 14). Restructuring expenses per reportable segment for the years ended 31 December are presented below:

2017 €28.9m €37.7m Corporate Governance

E €13.1m E D €1.6m D E €14.2m E b) Employee costs Employee costs for the years ended 31 December comprised:

2017 2016 Financial Statements ​ € million € million Wages and salaries 697.2 707.1 Social security costs 148.7 143.0 Pension and other employee benefits 128.2 112.8 Termination benefits 18.2 21.1 Total employee costs 992.3 984.0

The average number of full-time equivalent employees in 2017 was 29,427 (2016: 31,083). Employee costs for 2017 included in operating expenses and cost of goods sold amounted to €760.1m and €232.2m respectively (2016: €746.2m and €237.8m respectively). Swiss Statutory Reporting c) Directors’ and senior management remuneration The total remuneration paid or accrued for Directors and the senior management team for the years ended 31 December comprised:

2017 2016 ​ € million € million Salaries and other short-term benefits 13.8 18.7 Stock option and perfomance share awards 12.6 4.9 Pension and post-employment benefits 0.7 0.8 Total renumeration 27.1 24.4 d) Fees and other services of the auditor Supplementary Information Audit and other fees charged in the income statement concerning the auditor of the consolidated financial statements, PricewaterhouseCoopers S.A. and affiliates, were as follows, for the years ended 31 December:

2017 2016 ​ € million € million Audit fees 4.3 4.5 Audit-related fees 0.4 0.4 Other fees – 0.2 Total audit and all other fees 4.7 5.1

Coca-Cola HBC 2017 Integrated Annual Report 147 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

9. Finance costs, net

Accounting policy Interest income and interest expense are recognised using the effective interest rate method, and are recorded in the income statement within ‘Finance income’ and ‘Finance cost’ respectively.

Finance costs, net for the years ended 31 December comprised:

2017 2016 ​ € million € million Interest income 10.6 7.4 Interest expense (39.9) (60.6) Finance charges incurred with respect to finance leases (6.0) (7.7) Other finance costs (1.4) (1.4) Finance costs (47.3) (69.7) Finance costs, net (36.7) (62.3)

Other finance costs include commitment fees on loan facilities (for the part not yet drawn down) and other similar fees. 10. Taxation

Accounting policy Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or in equity. In this case, the tax is recognised in other comprehensive income or directly in equity. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate, on the basis of amounts expected to be paid to the tax authorities. Deferred tax is provided using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. However, the deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Tax rates enacted or substantively enacted at the balance sheet date are those that are expected to apply when the deferred tax asset is realised or deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through the reduction of the future taxes is probable. Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled by the Group, and it is probable that the temporary difference will not reverse in the foreseeable future. This includes taxation in respect of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future periods has been entered into by the subsidiary. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the deferred taxes relate to the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Critical accounting estimates The Group is subject to income taxes in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination cannot be assessed with certainty in the ordinary course of business. The Group recognises a provision for potential cases that might arise in the foreseeable future based on assessment of the probabilities as to whether additional taxes will be due. Where the final tax outcome on these matters is different from the amounts that were initially recorded, such differences will impact the income tax provision in the period in which such determination is made. The income tax provision amounted to €69.2m as at 31 December 2017 (2016: €56.7m) and is included in the line ‘Current tax liabilities’ of the consolidated balance sheet.

​

148 Coca-Cola HBC 2017 Integrated Annual Report The income tax charge for the years ended 31 December is as follows: Strategic Report

2017 2016 ​ € million € million Current tax expense 130.6 116.4 Deferred tax 7.8 (2.6) Income tax expense 138.4 113.8

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

2017 2016 ​ € million € million

Profit before tax 564.9 457.8 Corporate Governance ​ ​ ​ Tax calculated at domestic tax rates applicable to profits in the respective countries 130.1 105.0 Additional local taxes in foreign jurisdictions 8.8 8.9 Tax holidays in foreign jurisdictions (11.9) 0.7 Expenses non-deductible for tax purposes 15.4​ 14.9 Income not subject to tax (8.9) (12.5) Changes in tax laws and rates – (2.3) Movement in utilisation of accumulated tax losses 0.3 (2.3) Movement of deferred tax asset not recognised 2.0 (0.7) Recognition of previously unrecognised post-acquisition tax losses (0.3) 1.5 Other 2.9 0.6 Financial Statements Income tax expense 138.4 113.8

Non-deductible expenses for tax purposes include marketing and advertising expenses, service fees, bad debt provisions, entertainment expenses, certain employee benefits and stock options expenses and other items that, partially or in full, are not deductible for tax purposes in certain of our jurisdictions. Deferred tax assets and liabilities presented in the consolidated balance sheet as at 31 December, can be further analysed as follows:

2017 2016 Deferred tax assets: € million € million To be recovered after 12 months 47.1 48.0 To be recovered within 12 months 67.2 86.0 Swiss Statutory Reporting Gross deferred tax assets 114.3 134.0 Offset of deferred tax (55.2) (76.5) Net deferred tax assets 59.1 57.5 ​ ​ ​ Deferred tax liabilities: ​ ​ To be recovered after 12 months (167.1) (181.9) To be recovered within 12 months (22.1) (18.7) Gross deferred tax liabilities (189.2) (200.6) Offset of deferred tax 55.2 76.5 Net deferred tax liabilities (134.0) (124.1) Supplementary Information A reconciliation of net deferred tax is presented below:

2017 2016 ​ € million € million As at 1 January (66.6) (75.7) Taken to the income statement (7.8) 2.6 Taken to other comprehensive income (2.5) 8.1 Foreign currency translation 2.0 (1.6) As at 31 December (74.9) (66.6)

Coca-Cola HBC 2017 Integrated Annual Report 149 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

10. Taxation continued The movements in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction where applicable, are as follows:

Pensions and Tax losses Book in excess of Other deferred Provisions benefit plans carry-forward tax depreciation Leasing tax assets Total Deferred tax assets € million € million € million € million € million € million € million As at 1 January 2016 46.3 27.0 24.4 7.8 12.1 21.3 138.9 Taken to the income statement 7.7 (6.0) (9.1) 0.3 (3.3) 3.2 (7.2) Taken to other comprehensive income 0.3 6.0 – – – 0.3 6.6 Transfers between assets/liabilities 6.0 (1.0) – 0.2 – (6.0) (0.8) Foreign currency translation 3.2 (3.9) 1.4 – (0.2) (4.0) (3.5) As at 31 December 2016 63.5 22.1 16.7 8.3 8.6 14.8 134.0 Taken to the income statement (12.1) (0.1) (6.1) 13.5 (0.9) 1.7 (4.0) Taken to other comprehensive income – (2.1) – – – (0.1) (2.2) Transfers between assets/liabilities (0.3) 0.3 – (0.1) – (10.5) (10.6) Foreign currency translation (1.3) (1.5) (0.2) (1.5) – 1.6 (2.9) As at 31 December 2017 49.8 18.7 10.4 20.2 7.7 7.5 114.3

Tax in excess of Derivative Other deferred book depreciation instruments tax liabilities Total Deferred tax liabilities € million € million € million € million As at 1 January 2016 (203.8) (1.9) (8.9) (214.6) Taken to the income statement 13.6 (1.5) (2.3) 9.8 Taken to other comprehensive income – 1.5 – 1.5 Transfers between assets/liabilities (0.2) – 1.0 0.8 Foreign currency translation 2.0 – (0.1) 1.9 As at 31 December 2016 (188.4) (1.9) (10.3) (200.6) Taken to the income statement 7.9 0.2 (11.9) (3.8) Taken to other comprehensive income – (0.2) (0.1) (0.3) Transfers between assets/liabilities (0.1) – 10.7 10.6 Foreign currency translation 4.6 (0.1) 0.4 4.9 As at 31 December 2017 (176.0) (2.0) (11.2) (189.2)

Deferred tax assets recognised for tax losses carry-forward in accordance with the relevant local rules applying in our jurisdictions, can be analysed as follows:

2017 2016 ​ € million € million Attributable to tax losses that expire within five years 5.5 9.8 Attributable to tax losses that expire after five years 0.1 – Attributable to tax losses that can be carried forward indefinitely 4.8 6.9 Recognised deferred tax assets attributable to tax losses 10.4 16.7

The Group has unrecognised deferred tax assets attributable to tax losses that are available to carry forward against future taxable income of €12.6m (2016: €13.0m). These are analysed as follows:

2017 2016 ​ € million € million Attributable to tax losses that expire within five years 12.6 12.3 Attributable to tax losses that expire after five years – 0.7 Unrecognised deferred tax assets attributable to tax losses 12.6 13.0

The aggregate amount of distributable reserves arising from the realised earnings of the Group’s operations was €2,071.6m in 2017 (2016: €1,871.9m). No deferred tax liabilities have been recognised on such reserves given that their distribution is controlled by the Group, or in the event of plans to remit overseas earnings of subsidiaries, such distribution would not give rise to a tax liability.

150 Coca-Cola HBC 2017 Integrated Annual Report 11. Earnings per share Strategic Report

Accounting policy Basic earnings per share is calculated by dividing the net profit attributable to the owners of the parent by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the year is the number of ordinary shares outstanding at the beginning of the year, adjusted by the number of ordinary shares bought back or issued during the year multiplied by a time-weighting factor. Diluted earnings per share incorporates stock options for which the average share price for the year is in excess of the exercise price of the stock option and there is a dilutive effect.

The calculation of the basic and diluted earnings per share attributable to the owners of the parent entity is based on the following data:

Corporate Governance ​ 2017 2016 Net profit attributable to the owners of the parent (€ million) 426.0 343.5 Weighted average number of ordinary shares for the purposes of basic earnings per share (million) 364.7 362.1 Effect of dilutive stock options (million) 2.9 1.4 Weighted average number of ordinary shares for the purposes of diluted earnings per share (million) 367.6 363.5 Basic earnings per share (€) 1.17 0.95 Diluted earnings per share (€) 1.16 0.95

Outstanding stock options that have an anti-dilutive effect and therefore were excluded from diluted earnings per share in 2017 were €1.0m (2016: €4.3m). Financial Statements 12. Components of other comprehensive income The components of other comprehensive income for the years ended 31 December comprise:

​ 2017 2016 Before-tax Tax expense Net-of-tax Before-tax Tax income Net-of-tax ​ € million € million € million € million € million € million Available-for-sale financial assets 0.1 – 0.1 (0.1) – (0.1) Cash flow hedges 8.6 (0.3) 8.3 (31.3) 1.1 (30.2) Foreign currency translation (219.2) – (219.2) (112.9) – (112.9) Actuarial gains / (losses) 6.9 (2.2) 4.7 (41.7) 7.0 (34.7) Share of other comprehensive income of equity method investments (5.3) – (5.3) (7.5) – (7.5) Swiss Statutory Reporting Other comprehensive loss (208.9) (2.5) (211.4) (193.5) 8.1 (185.4)

The majority of foreign currency translation impact for 2017 is related to the Nigerian naira as well as the Russian rouble and the Swiss franc, while the majority of the impact for 2016 related to the Nigerian naira and the Russian rouble. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 151 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

13. Intangible assets

Accounting policy Intangible assets consist of goodwill, franchise agreements, trademarks and water rights. Goodwill and other indefinite-lived intangible assets are carried at cost less accumulated impairment losses, while intangible assets with finite lives are amortised over their useful economic lives. The useful lives, both finite and indefinite, assigned to intangible assets are evaluated on an annual basis.

Intangible assets with indefinite lives (‘not subject to amortisation’) Intangible assets not subject to amortisation consist of goodwill, franchise agreements and trademarks. Goodwill is the excess of the consideration transferred over the fair value of the share of net assets acquired. Goodwill and fair value adjustments arising on the acquisition of subsidiaries are treated as the assets and liabilities of those subsidiaries. These balances are denominated in the functional currency of the subsidiary and are translated to Euro on a basis consistent with the other assets and liabilities of the subsidiary. The useful life of franchise agreements is usually based on the term of the respective franchise agreements. The Coca-Cola Company does not grant perpetual franchise rights outside the United States. However, given the Group's strategic relationship with The Coca-Cola Company and consistent with past experience, the Group believes that franchise agreements will continue to be renewed at each expiration date with no significant costs. The Group has concluded that the franchise agreements are perpetual in nature and they have therefore been assigned indefinite useful lives. The Group’s trademarks are assigned an indefinite useful life when they have an established sales history in the applicable region. It is the intention of the Group to receive a benefit from them indefinitely and there is no indication that this will not be the case. Goodwill and other indefinite-lived intangible assets are tested for impairment annually and whenever there is an indication of impairment. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the business combination in which the goodwill arose. Other indefinite-lived intangible assets are also allocated to the Group’s cash- generating units expected to benefit from those intangibles. The cash-generating units (‘unit’) to which goodwill and other indefinite- lived intangible assets have been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount (i.e. the higher of the value-in-use and fair value less costs to sell) of the cash- generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro-rata to the other assets of the unit on the basis of the carrying amount of each asset in the unit. Impairment losses recognised against goodwill are not reversed in subsequent periods.

Intangible assets with finite lives Intangible assets with finite lives mainly consist of water rights and are amortised over their useful economic lives and are carried at cost less accumulated amortisation and impairment losses.

Critical accounting estimates Determining whether goodwill or indefinite-lived intangible assets are impaired requires an estimation of the value-in-use of the cash-generating units to which they have been allocated in order to determine the recoverable amount of the cash-generating units. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

152 Coca-Cola HBC 2017 Integrated Annual Report The movements in intangible assets by classes of assets during the year are as follows: Strategic Report

Franchise Other intangible Goodwill agreements Trademarks assets Total ​ € million € million € million € million € million Cost ​ ​ ​ ​ ​ As at 1 January 2016 1,882.6 155.7 56.9 26.2 2,121.4 Intangible assets arising on current year acquisitions (refer to Note 22) 3.2 – 7.8 8.8 19.8 Reclassified to assets held for sale (refer to Note 18) – – (7.8) (8.8) (16.6) Foreign currency translation (31.5) (6.3) 9.0 0.1 (28.7) As at 31 December 2016 1,854.3 149.4 65.9 26.3 2,095.9

Amortisation ​ ​ ​ ​ ​ Corporate Governance As at 1 January 2016 182.4 – 8.9 18.5 209.8 Charge for the year – – – 0.4 0.4 As at 31 December 2016 182.4 – 8.9 18.9 210.2 Net book value as at 1 January 2016 1,700.2 155.7 48.0 7.7 1,911.6 Net book value as at 31 December 2016 1,671.9 149.4 57.0 7.4 1,885.7 Cost ​ ​ ​ ​ ​ As at 1 January 2017 1,854.3 149.4 65.9 26.3 2,095.9 Additions – – 1.8 – 1.8 Foreign currency translation (50.7) (3.5) (3.0) – (57.2) As at 31 December 2017 1,803.6 145.9 64.7 26.3 2,040.5

Amortisation ​ ​ ​ ​ ​ Financial Statements As at 1 January 2017 182.4 – 8.9 18.9 210.2 Charge for the year – – – 0.4 0.4 As at 31 December 2017 182.4 – 8.9 19.3 210.6 Net book value as at 1 January 2017 1,671.9 149.4 57.0 7.4 1,885.7 Net book value as at 31 December 2017 1,621.2 145.9 55.8 7.0 1,829.9

Intangible assets not subject to amortisation amounted to €1,821.1m (2016: €1,878.3m), and are presented in the chart below: Swiss Statutory Reporting

2017 €1,821.1m €1,878.3m

€1,621.2m F €145.9m F T €54.0m T Supplementary Information

The carrying value of intangible assets subject to amortisation amounted to €8.8m (2016: €7.4m) and comprise primarily of water rights.

Coca-Cola HBC 2017 Integrated Annual Report 153 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

13. Intangible assets continued

Impairment tests for goodwill and other indefinite-lived intangible assets The recoverable amount of each cash-generating unit was determined through a value-in-use calculation. That calculation uses cash flow projections based on financial budgets approved by the Board of Directors covering a one-year period and cash projections for four additional years. Cash flows for years two to five were projected by management based on operation and market specific high-level assumptions including growth rates, discount rates and forecasted selling prices and direct costs. Management determined gross margins based on past performance, expectations for the development of the market and expectations about raw material costs. The growth rates used in perpetuity reflect the forecasts in line with management beliefs. These forecasts exceeded, in certain cases, those expected for the industry in general, due to the strength of our brand portfolio. Management estimates discount rates using rates that reflect current market assessments of the time value of money and risks specific to the countries of operation. No impairment of goodwill and other indefinite lived assets was indicated from the impairment tests of 2017 and 2016. The following table sets forth the carrying value of goodwill and other indefinite lived intangible assets for those cash-generating units whose carrying value is greater than 10% of the total, as at 31 December 2017.

Franchise Goodwill agreements Trademarks Total ​ € million € million € million € million Italy 625.2 126.9 – 752.1 Switzerland 393.0 – – 393.0 The Republic of Ireland and Northern Ireland 240.4 – – 240.4 All other cash-generating units 362.6 19.0 54.0 435.6 Total 1,621.2 145.9 54.0 1,821.1

For the above cash-generating units, cash flows beyond the five-year period (the period in perpetuity) have been extrapolated using the following estimated growth and discount rates:

Intangible assets not subject to Growth rate in perpetuity Discount rate amortisation as at 31 December 2017 (%) (%) (%) 2017 2016 2017 2016 I 41% Italy 2.5 2.5 6.7 6.5 S 22% T I Switzerland 1.1 1.5 6.7 6.7 N I 13% The Republic of Ireland O 24% and Northern Ireland 2.9 3.1 6.8 6.8

Sensitivity analysis In the cash-generating unit of Nigeria, which held €20.1m of goodwill and franchise agreements as at 31 December 2017, possible changes in certain key assumptions of the 2017 impairment test would remove the remaining headroom. As at 31 December 2017, the recoverable amount of the Nigerian CGU calculated based on value in use exceeded carrying value by €605.1m; changes per assumption that would eliminate remaining headroom are summarised in the table below: Average gross Growth rate in Discount ​ profit margin perpetuity rate Nigeria 6.0% 6.6% 5.3%

154 Coca-Cola HBC 2017 Integrated Annual Report 14. Property, plant and equipment Strategic Report

Accounting policy All property, plant and equipment is initially recorded at cost and subsequently measured at cost less accumulated depreciation and impairment losses. Subsequent expenditure is added to the carrying value of the asset when it is probable that future economic benefits, in excess of the original assessed standard of performance of the existing asset, will flow to the operation and the costs can be measured reliably. All other subsequent expenditure is expensed in the period in which it is incurred. Assets under construction are recorded as part of property, plant and equipment and depreciation on these assets commences when the assets are available for use. The Coca-Cola Company, at its sole discretion, provides the Group with contributions towards the purchase of cold drink equipment.

Payments are made on placement of coolers and are based on franchise incentive arrangements. The terms and conditions of these Corporate Governance arrangements require reimbursement if certain conditions stipulated in the agreements are not met, including minimum volume through-put requirements. Support payments received from The Coca-Cola Company for the placement of cold drink equipment are deducted from the cost of the related asset. Depreciation is calculated on a straight-line basis to allocate the depreciable amount over the estimated useful life of the assets as follows: Freehold buildings and improvements 40 years Leasehold buildings and improvements Over the lease term, up to 40 years Production equipment 4 to 20 years Vehicles 5 to 8 years Computer hardware and software 3 to 10 years Financial Statements Marketing equipment 3 to 10 years Fixtures and fittings 8 years Returnable containers 3 to 12 years

Freehold land is not depreciated as it is considered to have an indefinite life. Deposits received for returnable containers by customers are accounted for as deposit liabilities (refer to Note 19). Residual values and useful lives of assets are reviewed and adjusted if appropriate at each balance sheet date. Property, plant and equipment and other non-financial assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the

amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the asset’s fair value less cost Swiss Statutory Reporting to sell and its value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest level of separately identifiable cash flows. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 155 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

14. Property, plant and equipment continued The movements of property, plant and equipment by class of assets are as follows:

Land and Plant and Returnable Assets under buildings equipment containers construction Total € million € million € million € million € million Cost As at 1 January 2016 1,441.6 3,671.0 427.7 87.0 5,627.3 Additions 4.1 119.5 43.0 173.1 339.7 Arising on acquisitions (refer to Note 22) 1.5 1.3 – – 2.8 Disposals (25.0) (210.0) (14.2) (0.1) (249.3) Reclassified from assets held for sale (refer to Note 18) 10.4 3.0 – – 13.4 Reclassified to assets held for sale (refer to Note 18) (48.5) (3.0) – – (51.5) Reclassifications 43.0 102.0 – (145.0) – Foreign currency translation (20.5) (61.7) (62.4) (12.6) (157.2) As at 31 December 2016 1,406.6 3,622.1 394.1 102.4 5,525.2 Depreciation and impairment As at 1 January 2016 423.9 2,451.4 206.2 0.3 3,081.8 Charge for the year 39.5 229.5 36.5 – 305.5 Impairment 13.8 10.8 1.7 0.6 26.9 Disposals (9.5) (202.9) (11.7) – (224.1) Reclassified from assets held for sale (refer to Note 18) 6.3 2.8 – – 9.1 Reclassified to assets held for sale (refer to Note 18) (34.3) (2.8) – – (37.1) Foreign currency translation 0.8 (22.6) (21.7) – (43.5) As at 31 December 2016 440.5 2,466.2 211.0 0.9 3,118.6 Net book value as at 31 December 2016 966.1 1,155.9 183.1 101.5 2,406.6 Cost As at 1 January 2017 1,406.6 3,622.1 394.1 102.4 5,525.2 Additions 6.0 142.2 34.7 232.6 415.5 Disposals (18.9) (205.8) (17.1) – (241.8) Reclassified to assets held for sale (refer to Note 18) (40.7) (14.4) – – (55.1) Reclassifications 89.1 138.6 – (227.7) – Foreign currency translation (58.1) (157.6) (35.7) (14.6) (266.0) As at 31 December 2017 1,384.0 3,525.1 376.0 92.7 5,377.8 Depreciation As at 1 January 2017 440.5 2,466.2 211.0 0.9 3,118.6 Charge for the year 37.7 235.3 27.7 – 300.7 Impairment 6.7 7.5 1.7 0.2 16.1 Disposals (11.5) (202.8) (14.8) – (229.1) Reclassified to assets held for sale (refer to Note 18) (28.8) (12.1) – – (40.9) Foreign currency translation (13.2) (85.7) (10.7) – (109.6) As at 31 December 2017 431.4 2,408.4 214.9 1.1 3,055.8 Net book value as at 31 December 2017 952.6 1,116.7 161.1 91.6 2,322.0

Assets under construction at 31 December 2017 include advances for equipment purchases of €22.6m (2016: €12.5m). Depreciation charge for the year included in operating expenses amounted to €141.9m (2016: €135.0m). Depreciation charge for the year included in cost of goods sold amounted to €158.8m (2016: €170.5m).

156 Coca-Cola HBC 2017 Integrated Annual Report Impairment of property, plant and equipment Strategic Report In 2016 the Group recorded an impairment loss of €3.9m, €6.1m and €20.2m and recorded reversals of impairment of €0.9m, €nil and €2.4m relating to property, plant and equipment in the Established, Developing and Emerging segments respectively. This resulted in a net impairment loss of €3.0m, €6.1m and €17.8m in the Established, Developing and Emerging segments respectively. Impairment recorded mainly relates to restructuring initiatives (refer to Note 8). The impaired assets, being mainly buildings and production equipment, were written off based mainly on value-in-use calculations. In 2017 the Group recorded an impairment loss of €6.6m, €1.9m and €13.6m and recorded reversals of impairment of €0.9m, €1.4m and €3.7m relating to property, plant and equipment in the Established, Developing and Emerging segments respectively. This resulted in a net impairment loss of €5.7m, €0.5m and €9.9m in the Established, Developing and Emerging segments respectively. Impairment recorded mainly relates to restructuring initiatives (refer to Note 8). The impaired assets, being mainly buildings and production equipment, were written off based mainly on value-in-use calculations. Corporate Governance

Leased assets

Accounting policy Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased assets and the present value of the minimum lease payments. Each lease payment is allocated between liability and finance charges to achieve a constant rate on the finance balance outstanding. The corresponding lease obligations, net of finance charges, are included in current and non-current borrowings. The interest element of the finance cost is charged to the income statement over the lease period, so as to produce a

constant periodic rate of interest on the remaining balance of the liability for each period (refer to Note 24). Property, plant and Financial Statements equipment acquired under finance lease is depreciated over the shorter of the useful life of the asset and the lease term. The useful life for leased assets corresponds with the Group policy for the depreciable life of property, plant and equipment.

Included in property, plant and equipment are assets held under finance leases, where the Group is the lessee, as follows:

2017 2016 € million € million Cost 175.7 184.9 Accumulated depreciation (80.3) (82.4) Net book value 95.4 102.5

Net book value of assets held under finance leases by classes of assets is as follows: Swiss Statutory Reporting Plant and equipment 61.1 67.4 Land and buildings 34.3 35.1 Net book value 95.4 102.5 Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 157 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

15. Interest in other entities

List of principal subsidiaries The following are the principal subsidiaries of the Group as at 31 December: % of voting rights % ownership ​ Country of registration 2017 2016 2017 2016 AS Coca-Cola HBC Eesti Estonia 100.0% 100.0% 100.0% 100.0% CCB Management Services GmbH Austria 100.0% 100.0% 100.0% 100.0% CCHBC Armenia CJSC Armenia 90.0% 90.0% 90.0% 90.0% CCHBC Bulgaria AD Bulgaria 99.4% 99.4% 99.4% 99.4% CCHBC Insurance (Guernsey) Limited Guernsey 100.0% 100.0% 100.0% 100.0% CCHBC IT Services Limited Bulgaria 100.0% 100.0% 100.0% 100.0% Coca-Cola Beverages Austria GmbH Austria 100.0% 100.0% 100.0% 100.0% Coca-Cola Beverages Belorussiya Belarus 100.0% 100.0% 100.0% 100.0% Coca-Cola Beverages Ukraine Ltd​ Ukraine​ 100.0% 100.0% 100.0% 100.0% Coca-Cola Bottlers Chisinau S.R.L.​ Moldova​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC B-H d.o.o. Sarajevo​ Bosnia and Herzegovina​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Česko a Slovensko, s.r.o.1​ Czech Republic​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Česko a Slovensko, s.r.o. – organizačná zložka2​ Slovakia​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Finance B.V. The Netherlands 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Greece S.A.I.C. Greece 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Holdings B.V.​ The Netherlands​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Hrvatska d.o.o.​ Croatia​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Hungary Ltd Hungary​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Ireland Limited Republic of Ireland​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Italia S.r.l. Italy​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Kosovo L.L.C.​ Kosovo​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Northern Ireland Limited​ Northern Ireland​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Polska sp. z o.o.​ Poland​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Romania Ltd​ Romania​ 100.0% 100.0% 100.0% 100.0% Coca-Cola HBC Slovenija d.o.o.​ Slovenia 100.0%​ 100.0% 100.0%​ 100.0% Coca-Cola HBC Slovenska republica, s.r.o.2​ Slovakia –​ 100.0% – 100.0% Coca-Cola HBC Switzerland Ltd Switzerland 99.9% 99.9% 99.9% 99.9% Coca-Cola HBC-Srbija d.o.o. ​ Serbia​ 100.0% 100.0% 100.0% 100.0% Coca-Cola Hellenic Bottling Company-Crna Gora d.o.o., Podgorica​ Montenegro​ 100.0% 100.0% 100.0% 100.0% Coca-Cola Hellenic Business Service Organisation ​ Bulgaria​ 100.0% 100.0% 100.0% 100.0% Coca-Cola Hellenic Procurement GmbH​ Austria​ 100.0% 100.0% 100.0% 100.0% CC Beverages Holdings II B.V.​ The Netherlands​ 100.0% 100.0% 100.0% 100.0% Lanitis Bros Ltd​ Cyprus​ 100.0% 100.0% 100.0% 100.0% LLC Coca-Cola HBC Eurasia​ Russia​ 100.0% 100.0% 100.0% 100.0% Nigerian Bottling Company Ltd ​ Nigeria​ 100.0% 100.0% 100.0% 100.0% SIA Coca-Cola HBC Latvia​ Latvia​ 100.0% 100.0% 100.0% 100.0% Star Bottling Limited.​ Cyprus​ 100.0% 100.0% 100.0% 100.0% UAB Coca-Cola HBC Lietuva​ Lithuania​ 100.0% 100.0% 100.0% 100.0%

1. Effective 4 January 2017 Coca-Cola HBC Ceska republica, s.r.o. was renamed Coca-Cola HBC Česko a Slovensko, s.r.o. 2. Effective 1 April 2017 Coca-Cola HBC Slovenska republica, s.r.o was merged with Coca-Cola HBC Česko a Slovensko, s.r.o. – organizačná zložka, branch of Coca‑Cola HBC Ceska republica, s.r.o.

158 Coca-Cola HBC 2017 Integrated Annual Report Associates and joint arrangements Strategic Report

Accounting policies

Investments in associates Investments in associated undertakings are accounted for by the equity method of accounting. Associated undertakings are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% to 50% of the voting rights. The equity method of accounting involves recognising the Group’s share of the associates’ post-acquisition profit or loss and movements in other comprehensive income for the period in the income statement and other comprehensive income respectively. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. Corporate Governance The Group’s interest in each associate is carried in the balance sheet at an amount that reflects its share of the net assets of the associate and includes goodwill on acquisition. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associate.

Investments in joint arrangements Joint arrangements are arrangements in which the Group has contractually agreed sharing of control, which exists only when decisions about the relevant activities require unanimous consent. Joint arrangements are classified as joint ventures or joint operations depending upon the rights and obligations arising from the joint arrangement. The Group classifies a joint arrangement as a joint venture when the Group has rights to the net assets of the arrangement. The Group accounts for its interests in joint ventures using the equity method of accounting as described in the section above. Financial Statements The Group classifies a joint arrangement as a joint operation when the Group has the rights to the assets, and obligations for the liabilities, of the arrangement and accounts for each of its assets, liabilities, revenues and expenses, including its share of those held or incurred jointly, in relation to the joint operation. If facts and circumstances change, the Group reassesses whether it still has joint control and whether the type of joint arrangement in which it is involved has changed.

Critical accounting judgements The Group participates in several joint arrangements. Judgement is required in order to determine their classification as a joint venture where the Group has rights to the net assets of the arrangement, or a joint operation where the Group has rights to the assets and obligations for the liabilities of the arrangement. In making this judgement, consideration is given to the legal form of the arrangement,

and the contractual terms and conditions, as well as other facts and circumstances (including the economic rationale of the Swiss Statutory Reporting arrangement and the impact of the legal framework). a) Equity method investments Changes in the carrying amounts of equity method investments are as follows:

Associates Joint ventures Total ​ € million € million € million As at 1 January 2016 23.2 90.6 113.8 Capital increase – 7.9 7.9 Additions (refer to Note 22) – 7.1 7.1

Share of results of equity method investments 7.8 6.0 13.8 Supplementary Information Share of other comprehensive income of equity method investments (7.4) (0.1) (7.5) Share of total comprehensive income 0.4 5.9 6.3 Dividends (1.1) (17.0) (18.1) As at 31 December 2016 22.5 94.5 117.0 Share of results of equity method investments 5.2 6.6 11.8 Share of other comprehensive income of equity method investments (5.2) (0.1) (5.3) Share of total comprehensive income – 6.5 6.5 Disposals (refer to Note 22) – (3.5) (3.5) Return of capital – (17.7) (17.7) Dividends (0.5) (5.0) (5.5) As at 31 December 2017 22.0 74.8 96.8

Coca-Cola HBC 2017 Integrated Annual Report 159 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

15. Interests in other entities continued Included in investment in associates is the Group’s investment in Frigoglass Industries Limited and Frigoglass West Africa Ltd. Nigerian Bottling Company Ltd holds an interest in Frigoglass Industries Limited of 23.9% (2016: 23.9% respectively). The Group has a 100% (2016: 100%) interest in Nigeria Bottling Company Ltd, therefore the Group has an effective interest of 23.9% in both Frigoglass Industries Limited (2016: 23.9%) and Frigoglass West Africa Ltd (2016: 23.9%). In 2017, Frigoglass Industries Nigeria Limited and Frigoglass West Africa Ltd, became guarantors under the amended banking facilities and notes issued by the Frigoglass Group, as part of the debt restructuring of the latter. The Group has no direct exposure arising from these guarantee arrangements, but the Group’s investment in these associates, which stood at €16.8m as at 31 December 2017, would be at potential risk if there was a default under the terms of the amended banking facilities or the notes and the Frigoglass Group (including the guarantors) were unable to meet their obligations there under.

Investments in joint ventures The Group has a significant joint venture with Heineken that is conducted through a number of legal entities being the BrewTech B.V. Group of companies, which is engaged in the bottling and distribution of soft drinks and beer in FYROM and the Brewinvest S.A. Group of companies which has minimal activity. BrewTech B.V. is incorporated in the Netherlands and the Group owns 50% (2016: 50%) of its share capital. Brewinvest S.A., parent company of Brewinvest S.A. Group of companies, which has minimal other activities, is incorporated in Greece and the Group owns 50% (2016: 50%) of its share capital. The structure of the joint venture provides the Group with rights to their net assets. Summarised financial information of the Group’s significant joint venture is as follows (the information below reflects the amount presented in the IFRS financial statements of the joint venture, and not the Group’s share in those amounts):

2017 2016 ​ € million € million Summarised balance sheet: ​ ​ Non-current assets​ 56.1​ 46.9​ Cash and cash equivalents 5.4 31.1 Other current assets 7.8 16.8 Total current assets 13.2 47.9 Other current liabilities (including trade payables) (11.2) (10.9) Total current liabilities (11.2) (10.9) Non-current other liabilities (0.1) (0.2) Net assets 58.0 83.7 ​ ​ ​ Summarised statement of comprehensive income: ​ ​ Revenue 61.8 57.8 Depreciation and amortisation (5.0) (4.7) Interest income 0.2 0.6 Interest expense – (0.1) Profit before tax 13.9 13.2 Income tax expense (1.7) (1.6) Profit after tax 12.2 11.6 Other comprehensive income 0.1 – Total comprehensive income 12.3 11.6 Dividends received and capital returns (refer to Note 26) 19.3 16.5 ​ ​ ​ Reconciliation of net assets to carrying amount: ​ ​ Closing net assets 58.0 83.7 Interest in joint venture at 50% 29.0 41.8 Goodwill 16.9 16.9 Non-controlling interest (1.7) (1.7) Carrying value 44.2 57.0

160 Coca-Cola HBC 2017 Integrated Annual Report Summarised financial information of the Group’s investment in other joint venture is as follows: Strategic Report

2017 2016 ​ € million € million Carrying amount 30.6 37.5 Share of profit 0.5 0.2 Share of other comprehensive income (0.1) (0.1) Share of total comprehensive income 0.4 0.1

The Group’s share of profit in other joint ventures includes restructuring initiatives within joint ventures of €0.2m (2016: €0.1m) At 31 December 2017, the Group’s share of its joint ventures’ capital commitments and long-term commitments to purchase raw materials and receive services amounted to €nil (2016: €0.4m and €nil respectively). Corporate Governance b) Joint operations with TCCC The Group has a 50% interest in the Multon Z.A.O. group of companies (‘Multon’). Multon is engaged in the production and distribution of juices in Russia and is classified as a joint operation as the arrangement gives the Group rights to the assets and obligations for the liabilities relating to the joint arrangement. Other joint operations of the Group comprise mainly a 50% interest in each of the water businesses depicted below, which are engaged in the production and distribution of water in the respective countries. Country Joint operation ​ Country Joint operation Austria Römerquelle ​ Poland Multivita Italy Fonti del Vulture ​ Switzerland Valser Romania Dorna ​ Serbia Vlasinka

Baltics Neptuno Vandenys ​ ​ ​ Financial Statements

16. Inventories

Accounting policy Inventories are stated at the lower of cost and net realisable value. Cost for raw materials and consumables is determined on a weighted average basis. Cost for work in progress and finished goods is comprised of the cost of direct materials and labour plus attributable overhead costs. Cost includes all costs incurred to bring the product to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to complete and sell the inventory. Swiss Statutory Reporting

Inventories consisted of the following at 31 December:

2017 2016 ​ € million € million Finished goods 197.7 199.8 Raw materials and work in progress 151.4 158.3 Consumables 67.7 73.4 Total inventories 416.8 431.5

The amount of inventories recognised as an expense during 2017 was €3,154.6m (2016: €2,990.3m). During 2017 provision of obsolete Supplementary Information inventories recognised as an expense amounted to €10.6m (2016: €11.4m), whereas provision reversed in the year amounted to €1.2m (2016: €0.5m).

Coca-Cola HBC 2017 Integrated Annual Report 161 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

17. Trade, other receivables and assets

Accounting policies Trade receivables are initially recognised at fair value and subsequently measured at amortised cost. A provision for doubtful debts is established when there is objective evidence that the Group will not be able to collect all amounts due, according to the original terms of the trade receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganisation and default or delinquency in payments (over 90 days) are considered indicators that the trade receivable could be uncollectible. The amount of the provision is the difference between the receivable’s carrying amount and the present value of its estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the receivable is reduced by the amount of the provision, which is recognised as part of operating expenses. If a trade receivable ultimately becomes uncollectible, it is written off initially against any provision made in respect of that receivable with any excess recognised as part of operating expenses. Subsequent recoveries of amounts previously written off or provisions no longer required are credited against operating expenses. Loans are initially recognised at the fair value net of transaction costs incurred. After initial recognition, all interest-bearing loans are subsequently measured at amortised cost. Amortised cost is calculated using the effective interest rate method whereby any discount, premium or transaction costs associated with a loan are amortised to the income statement over the borrowing period.

Financial assets The Group classifies its investments in debt and equity securities into the following categories: held-to-maturity and available-for-sale. The classification depends on the purpose for which the investment was acquired. Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for those with maturities within 12 months from the balance sheet date, which are classified as current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to need for liquidity or changes in interest rates, are classified as available-for-sale and are classified as non-current assets, unless they are expected to be realised within 12 months of the balance sheet date. Available-for-sale financial assets are carried at fair value. Held-to-maturity investments are carried at amortised cost using the effective interest rate method. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. When the Group has neither transferred nor retained substantially all the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Unrealised gains and losses on available-for-sale financial assets are recognised in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary financial assets that are recognised in the income statement, until the financial assets are derecognised, at which time the cumulative gains or losses previously recognised in equity are reclassified to the income statement. Gains and losses on held-to-maturity investments are recognised in the income statement, when the investments are derecognised or impaired.

162 Coca-Cola HBC 2017 Integrated Annual Report Trade, other receivables and assets consisted of the following as at 31 December: Strategic Report Current assets Non-current assets 2017 2016 2017 2016 ​ € million € million € million € million Trade and other receivables: ​ ​ ​ ​ Trade receivables 688.7 727.6 2.0 2.2 Receivables from related parties (refer to Note 26) 89.8 117.0 – – Loans to related parties (refer to Note 26) 3.6 5.2 – – Loans receivable 1.2 0.1 0.7 0.4 Receivables from sale of property, plant and equipment 2.8 0.5 – – Non-current income tax receivable – – 8.5 8.4

VAT and other taxes receivable 30.0 35.5 – – Corporate Governance Loans and advances to employees 5.5 5.7 – – Other receivables 72.3 63.2 – – Total trade and other receivables 893.9 954.8 11.2 11.0 Other assets: ​ ​ ​ ​ Prepayments 72.9 76.0 14.6 13.2 Held-to-maturity investments – – 0.9 0.9 Pension plan assets (refer to Note 20) – – 2.0 – Available-for-sale financial assets – – 3.7 3.6 Total other assets 72.9 76.0 21.2 17.7 Total trade, other receivables and assets 966.8 1,030.8 32.4 28.7 Financial Statements

Non-current trade receivables relate to re-negotiated receivables, which are expected to be settled within the new contractual due date. Current assets classified within the category ‘held-to-maturity’ are recorded as ‘Other financial assets’ in the consolidated balance sheet, refer to Note 23 – ‘Financial instruments categories’. Trade receivables classified as current assets consisted of the following at 31 December:

2017 2016 ​ € million € million Trade receivables 792.3 819.6 Less: Provision for doubtful debts (103.6) (92.0) Total trade receivables 688.7 727.6 Swiss Statutory Reporting

Trade receivables classified as current assets, are as follows:

2017 2016 ​ € million € million Within due date 576.8 588.9 Less: Provision for doubtful debts within due date (3.4) (2.5) Past due 215.5 230.7 Less: Provision for doubtful debts past due (100.2) (89.5) Total trade receivables 688.7 727.6

The carrying amount of the trade receivables include €0.3m which are subject to a factoring agreement (2016: €15.3m). The Group continues to recognise the factored receivables in their entirety as it has retained the significant risks of ownership. The amount payable Supplementary Information under the factoring agreement is presented within borrowings (refer to Note 24).

Coca-Cola HBC 2017 Integrated Annual Report 163 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

17. Trade, other receivables and assets continued The ageing analysis of past due trade receivables is as follows: 2017 ​ € million Up to three Three to six Six to nine More than nine ​ months months months months Total Trade receivables past due but not impaired 103.8 2.3 2.0 7.2 115.3 Trade receivables past due and impaired 4.4 7.5 5.0 83.3 100.2 Total trade receivables past due 108.2 9.8 7.0 90.5 215.5 2016 ​ € million Up to three Three to six Six to nine More than nine ​ months months months months Total Trade receivables past due but not impaired 114.6 12.6 3.5 10.5 141.2 Trade receivables past due and impaired 4.1 7.3 3.4 74.7 89.5 Total trade receivables past due 118.7 19.9 6.9 85.2 230.7

The movement in the provision for doubtful debts during the year is as follows:

2017 2016 ​ € million € million As at 1 January (92.0) (78.9) Amounts written off during the year 5.3 7.7 Amounts recovered during the year 6.0 2.2 Increase in allowance recognised in income statement (23.6) (22.8) Foreign currency translation 0.7 (0.2) As at 31 December (103.6) (92.0)

Receivables from related parties The related party receivables, net of the provision for doubtful debts, are as follows:

2017 2016 ​ € million € million Within due date 85.7 114.0 Past due 4.4 3.3 Less: Provision for doubtful debts (0.3) (0.3) Total related party receivables 89.8 117.0

As at 31 December 2017, related party receivables of €4.1m (2016: €3.0m) were past due but not impaired. The ageing analysis of these receivables is as follows:

2017 2016 ​ € million € million Up to three months 3.3 1.3 Three to six months 0.2 0.3 Six to nine months 0.1 0.3 More than nine months 0.5 1.1 Total 4.1 3.0

164 Coca-Cola HBC 2017 Integrated Annual Report 18. Assets classified as held for sale Strategic Report

Accounting policy Non-current assets and disposal groups are classified as held for sale if it is considered highly probable that their carrying amount will be principally recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. In order for a sale to be considered highly probable, management must be committed to a plan to sell the asset, an active programme to locate a buyer and complete the plan must have been initiated, and the sale expected to be completed within one year from the date of classification. In the event that the criteria for continued classification as held for sale are no longer met, the assets are reclassified to property, plant and equipment and the depreciation charge is adjusted for the depreciation that would have been recognised had the assets not been classified as held for sale.

Non-current assets and disposal groups classified as held for sale are measured at the lower of the individual assets’ previous carrying Corporate Governance amount and their fair value less costs to sell.

Changes in carrying amounts of assets classified as held for sale for the years ended 31 December are as follows:

2017 2016 ​ € million € million As at 1 January 11.8 5.5 Reclassified from property, plant and equipment (refer to Note 14) 14.2 14.4 Other assets classified as held for sale – 14.0 Disposals (22.5) (17.1) Reclassified to property, plant and equipment (refer to Note 14) – (4.3) Foreign currency translation (0.2) (0.7) Financial Statements As at 31 December 3.3 11.8

In 2016, it was agreed that 50% of the Group’s share in its subsidiary Neptūno Vandenys, UAB, would be sold to European Refreshments, a subsidiary of TCCC. Accordingly, 50% of the net assets of Neptūno Vandenys, UAB amounting to €14.0m, mainly relating to intangible assets of €16.6m (refer to Note 13), net of the relevant deferred tax liability, were classified as assets held for sale. The transaction was completed in December 2016 (refer to Note 22). Total assets classified as held for sale as at 31 December 2016 amounted to €11.8m comprising property, plant and equipment in our Established, Developing and Emerging markets, measured at the lower of the carrying amount and fair value less costs to sell. The fair value of held for sale assets was determined through the use of a sales comparison approach and is a non-recurring fair value measurement within Level 3 of the fair value hierarchy. Total assets classified as held for sale as at 31 December 2017 amounted to €3.3m comprising the net book value of property, plant and Swiss Statutory Reporting equipment in our Established, Developing and Emerging markets that have been written down to fair value less cost to sell. The fair value of assets classified as held for sale was determined through the use of a sales comparison approach and is a non-recurring fair value measurement within Level 3 of the fair value hierarchy.

19. Trade and other payables

Accounting policy Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

Trade and other payables consisted of the following at 31 December:

2017 2016 Supplementary Information ​ € million € million Trade payables 569.5 536.7 Accrued liabilities 428.1 471.2 Payables to related parties (refer to Note 26) 300.9 303.4 Deposit liabilities 94.0 100.6 Other tax and social security liabilities 84.8 98.1 Salaries and employee-related payables 41.8 43.6 Deferred income 1.0 1.0 Other payables 24.3 32.7 Total trade and other payables 1,544.4 1,587.3 The amount due to pension funds as at 31 December 2017 was €0.9m (2016: €1.3m).

Coca-Cola HBC 2017 Integrated Annual Report 165 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

20. Provisions and employee benefits Provisions and employee benefits consisted of the following at 31 December:

2017 2016 ​ € million € million Current: ​ ​ Employee benefits 61.8 96.0 Restructuring provisions 7.7 8.5 Other provisions 14.1 14.1 Total current provisions and employee benefits 83.6 118.6 ​ ​ ​ Non-current: ​ ​ Employee benefits 118.7 123.0 Other provisions 1.5 2.0 Total non-current provisions and employee benefits 120.2 125.0 Total provisions and employee benefits 203.8 243.6 a) Provisions

Accounting policy Provisions are recognised when: the Group has a present obligation (legal or constructive) as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset only when such reimbursement is virtually certain. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

The movements in restructuring and other provisions comprise:

2017 2016 ​ € million € million Restructuring Other Restructuring Other ​ provisions provisions provisions provisions As at 1 January 8.5 16.1 15.8 10.1 Arising during the year 19.3 5.4 22.7 11.8 Utilised during the year (17.3) (4.2) (26.8) (4.3) Unused amount reversed (2.5) (1.6) (2.5) (1.5) Foreign currency translation (0.3) (0.1) (0.7) – As at 31 December 7.7 15.6 8.5 16.1

Other provisions comprise a provision for employee litigation of €3.2m (2016: €4.2m) and other items of €12.4m (2016: €11.9m).

166 Coca-Cola HBC 2017 Integrated Annual Report b) Employee benefits Strategic Report

Accounting policies

Employee benefits The Group operates a number of defined benefit and defined contribution pension plans in its territories. The defined benefit plans are made up of both funded and unfunded pension plans and employee leaving indemnities. The assets of funded plans are generally held in separate trustee-administered funds and are financed by payments from employees and/or the relevant Group companies. The liability recognised in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at

the balance sheet date less the fair value of the plan assets. Corporate Governance For defined benefit pension plans, pension costs are assessed using the projected unit credit method. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Such actuarial gains and losses are not reclassified to the income statement in subsequent periods. The defined benefit obligations are measured at the present value of the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. Past service cost is recognised immediately in the income statement. A number of the Group’s operations have other long-service benefits in the form of jubilee plans. These plans are measured at the present value of the estimated future cash outflows with immediate recognition of actuarial gains and losses in the income statement. The Group’s contributions to the defined contribution pension plans are charged to the income statement in the period to which the contributions relate. Financial Statements

Termination benefits Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: a) when the Group can no longer withdraw the offer of those benefits and b) when the Group recognises costs for a restructuring that is within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer.

Critical accounting estimates Swiss Statutory Reporting The Group provides defined benefit pension plans as an employee benefit in certain territories. Determining the value of these plans requires several actuarial assumptions and estimates about discount rates, future salary increases and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.

Employee benefits consisted of the following at 31 December:

2017 2016 ​ € million € million Defined benefit plans: ​ ​ Employee leaving indemnities 68.9 76.0 Pension plans 27.7 39.8

Long service benefits – jubilee plans 7.4 8.4 Supplementary Information Total defined benefits plans 104.0 124.2 Other employee benefits: ​ ​ Annual leave 7.5 7.4 Other employee benefits 69.0 87.4 Total other employee benefits 76.5 94.8 Total employee benefits obligations 180.5 219.0

Other employee benefits are primarily comprised of employee bonuses including a management incentive plan which is a cash variable plan that operates over a three-year period.

Coca-Cola HBC 2017 Integrated Annual Report 167 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

20. Provisions and employee benefits continued Employees of Coca-Cola HBC’s subsidiaries in Austria, Bulgaria, Croatia, Greece, Italy, Montenegro, Nigeria, Poland, Romania, Serbia and Slovenia are entitled to employee leaving indemnities, generally based on each employee’s length of service, employment category and remuneration. These are unfunded plans where the Company meets the payment obligation as it falls due. Coca-Cola HBC’s subsidiaries in Austria, Greece, Northern Ireland, the Republic of Ireland and Switzerland sponsor defined benefit pension plans. Of the three plans in the Republic of Ireland, two have plan assets, as do the two plans in Northern Ireland, one plan in Greece and two plans in Switzerland. The Austrian plans do not have plan assets and the Company meets the payment obligation as it falls due. The defined benefit plans in Austria, Greece, Republic of Ireland and Northern Ireland are closed to new members. Coca-Cola HBC provides long-service benefits in the form of jubilee plans to its employees in Austria, Croatia, Nigeria, Poland, Slovenia and Switzerland. Defined benefit obligation by segment is as follows for the years ended 31 December:

2017 T €104.0m

T €124.2m

E D E

The average duration of the defined benefit obligations is 19 years and the total employer contributions expected to be paid in 2018 are €16.8m. Reconciliation of defined benefit obligation:

2017 2016 ​ € million € million Present value of defined benefit obligation at 1 January 525.6 496.4 Current service cost 8.8 10.5 Interest cost 9.0 11.2 Plan participants’ contributions 4.4 4.5 Past service cost (0.2) (8.8) Curtailment/settlement (6.8) (1.3) Benefits paid (26.5) (25.3) Loss from change in demographic assumptions – 0.4 Loss from change in financial assumptions 6.1 56.2 Experience adjustments (3.5) 3.2 Foreign currency translation (27.3) (21.4) Present value of defined benefit obligation at 31 December 489.6 525.6 ​ ​ Reconciliation of plan assets:​

2017 2016 ​ € million € million Fair value of plan assets at 1 January 401.4 380.7 Interest income on plan assets 5.3 7.1 Return on plan assets excluding interest income 18.9 18.6 Actual employer’s contributions 12.9 16.2 Actual participants’ contributions 4.4 4.5 Actual benefits paid (18.6) (15.4) Settlement (5.7) (1.1) Admin expenses (0.3) (0.3) Foreign currency translation (22.4) (8.9) Fair value of plan assets at 31 December 395.9 401.4

168 Coca-Cola HBC 2017 Integrated Annual Report The present value and funded status of defined benefit obligations were as follows at 31 December: Strategic Report

2017 2016 ​ € million € million Present value of funded obligations 411.3 439.1 Fair value of plan assets (395.9) (401.4) Defined benefit obligations of funded plans 15.4 37.7 Present value of unfunded obligations 78.3 86.5 Unrecognised asset due to asset ceiling 8.3 – Defined benefit obligations 102.0 124.2 Plus: amounts recognised within non-current assets (refer to Note 17) 2.0 – Total defined benefit obligations 104.0 124.2 Corporate Governance

Funding levels are monitored in conjunction with the agreed contribution rate. The funding level of the funded plans as at 31 December 2017 was 94% (2016: 91%). Two of the plans have funded status surplus of €2.0m as at 31 December 2017 (31 December 2016: € nil) that is recognised as an asset on the basis that the Group has an unconditional right to future economic benefits either via a refund or a reduction in future contributions. The movement in the defined benefit obligation recognised on the balance sheet was as follows:

2017 2016 ​ € million € million Defined benefit obligation as at 1 January 124.2 115.7 Expense recognised in the income statement 10.4 5.4

Remeasurements recognised in OCI (6.9) 41.7 Financial Statements Employer contributions (12.9) (16.2) Benefits paid (7.9) (9.9) Foreign currency translation (4.9) (12.5) Defined benefit obligation as at 31 December 102.0 124.2 Plus: amounts recognised within non-current assets (refer to Note 17) 2.0 – Total defined benefit obligation as at 31 December 104.0 124.2

The expense recognised in the income statement comprised the following for the years ended 31 December:

2017 2016 ​ € million € million

Service cost 7.5 1.5 Swiss Statutory Reporting Net interest cost on defined benefit liability / (asset) 3.7 4.1 Actuarial gain (1.1) (0.5) Administrative expenses 0.3 0.3 Total 10.4 5.4

Defined benefit plan expense is included in staff costs and presented in cost of goods sold and operating expenses. The assumptions (weighted average for the Group) used in computing the defined benefit obligation comprised the following for the years ended 31 December:

2017 2016 ​ % % Supplementary Information Discount rate 1.8 1.9 Rate of compensation increase 2.7 2.7 Rate of pension increase 1.1 1.0 Life expectancy for pensioners at the age of 65 in years: ​ ​ Male 22 22 Female 24 24

Asset liability matching: Plan assets allocated to growth assets are monitored regularly to ensure they remain appropriate and in line with the Group’s long-term strategy to manage the plans. As the plans mature, the level of investment risk will be reduced by investing more in assets such as bonds that better match the liabilities.

Coca-Cola HBC 2017 Integrated Annual Report 169 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

20. Provisions and employee benefits continued Pension plan assets are invested in different asset classes in order to maintain a balance between risk and return. Investments are well diversified to limit the financial effect of the failure of any individual investment. Through its defined benefit plans the Group is exposed to a number of risks, as outlined below: Asset volatility: The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, a deficit will be created. The Northern Ireland, the Republic of Ireland and Swiss plans hold a significant proportion of growth assets (equities) which are expected to outperform corporate bonds in the long term while providing volatility and risk in the short term. Changes in bond yields: A decrease in corporate bond yields will increase the plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings. Whereas an increase in corporate bond yields will decrease the plan liabilities, although this will be partially offset by a decrease in the value of the plans’ bond holdings. Inflation: The Northern Ireland, the Republic of Ireland and Swiss plans’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit. Life expectancy: The majority of the pension plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the liabilities. The sensitivity analysis presented below is based on a change in assumption while all other assumptions remain constant.

Impact on defined benefit obligation as at ​ 31 December 2017 Change in Increase in Decrease in ​ assumptions assumption assumption Discount rate 0.50% 8.7% 10.1 % Rate of compensation increase 0.50% 2.2% 2.0 % Rate of pension increase 0.50% 4.6% 2.6 % Life expectancy 1 year 2.7% 2.6 %

Plan assets are invested as follows: The assets of funded plans are generally held in separately administered trusts, either as specific assets or as a proportion of a general fund, or are insurance contracts. Plan assets held in trust are governed by local regulations and practice in each country. The category ‘other’ mainly includes investments in funds holding a portfolio of assets. Plan assets relate predominantly to quoted financial instruments. Equity securities were not invested in ordinary shares of the Company as at 31 December 2017 or 31 December 2016.

Assets category 2017 (%) Assets category 2016 (%)

E E 6% E E E NE 28% E NE E 21% E C E 6% C E C NE 16% C NE 11% C 3% C O 9% O

Defined contribution plans The expense recognised in the income statement in 2017 for the defined contribution plan is €16.9m (2016: €19.0m). This is included in employee costs and recorded in cost of goods sold and operating expenses.

170 Coca-Cola HBC 2017 Integrated Annual Report 21. Offsetting financial assets and financial liabilities Strategic Report

Accounting policy The Group offsets financial assets and financial liabilities to the net amount reported in the balance sheet when it currently has a legally enforceable right to offset the recognised amounts and it intends to settle on a net basis or to realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements or other similar agreements. In general, under such agreements the counterparties can elect to settle into one single net amount the aggregated amounts owed by each counterparty on a single day with respect of all outstanding transactions of the same currency and the Corporate Governance same type of derivative. In the event of default or early termination all outstanding transactions under the agreement are terminated and subject to any set-off. These agreements do not meet all of the IAS 32 criteria for offsetting in the balance sheet as the Group does not have any current legally enforceable right to offset amounts since the right can only be applied if elected by both counterparties. The financial assets and financial liabilities presented below are subject to offsetting, enforceable master netting or similar agreements. The column ‘Net amount’ shows the impact on the Group’s balance sheet if all set-off rights were exercised. a) Financial assets As at 31 December 2017 Related amounts not set ​ ​ ​ ​ off in the balance sheet ​ Gross amounts of

Gross amounts of recognised financial Net amounts of financial Financial Statements recognised financial liabilities set off in the assets presented in the Financial assets balance sheet balance sheet instruments Net amount ​ € million € million € million € million € million Derivative financial assets 16.4 – 16.4 (5.0) 11.4 Cash and cash equivalents 723.5 – 723.5 – 723.5 Other financial assets 150.9 – 150.9 – 150.9 Trade receivables 757.2 (68.5) 688.7 – 688.7 Total 1,648.0 (68.5) 1,579.5 (5.0) 1,574.5

As at 31 December 2016 Related amounts not set ​ ​ ​ ​ off in the balance sheet ​

Gross amounts of Swiss Statutory Reporting Gross amounts of recognised financial Net amounts of financial recognised financial liabilities set off in the assets presented in the Financial assets balance sheet balance sheet instruments Net amount ​ € million € million € million € million € million Derivative financial assets 16.0 – 16.0 (8.3) 7.7 Cash and cash equivalents 573.2 – 573.2 – 573.2 Trade receivables 780.7 (53.1) 727.6 – 727.6 Total 1,369.9 (53.1) 1,316.8 (8.3) 1,308.5 b) Financial liabilities As at 31 December 2017

Related amounts not set Supplementary Information ​ ​ ​ ​ off in the balance sheet ​ Gross amounts of Gross amounts of recognised financial Net amounts of financial recognised financial assets set off in the liabilities presented in Financial liabilities balance sheet the balance sheet instruments Net amount ​ € million € million € million € million € million Derivative financial liabilities 5.4 – 5.4 (5.0) 0.4 Trade payables 638.0 (68.5) 569.5 – 569.5 Total 643.4 (68.5) 574.9 (5.0) 569.9

Coca-Cola HBC 2017 Integrated Annual Report 171 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

21. Offsetting financial assets and financial liabilities continued As at 31 December 2016 Related amounts not set ​ ​ ​ ​ off in the balance sheet ​ Gross amounts of Gross amounts of recognised financial Net amounts of financial recognised financial assets set off in the liabilities presented in the Financial liabilities balance sheet balance sheet instruments Net amount ​ € million € million € million € million € million Derivative financial liabilities 15.5 – 15.5 (8.3) 7.2 Trade payables 589.8 (53.1) 536.7 – 536.7 Total 605.3 (53.1) 552.2 (8.3) 543.9

22. Business combinations

Accounting policy The acquisition method of accounting is used to account for business combinations. The consideration transferred is the fair value of any asset transferred, shares issued and liabilities assumed. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date. The excess of the consideration transferred and the fair value of non-controlling interest over the net assets acquired and liabilities assumed is recorded as goodwill. All acquisition-related costs are expensed as incurred. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.

Acquisition of controlling interest On 1 April 2016, the Group acquired 100% of Neptūno Vandenys, UAB, the leading bottled water company in Lithuania, for a consideration of €19.5m, including the assumption of debt of €1.0m. The acquisition includes the mineral water brand ‘Neptūnas’ and is expected to increase the Group’s market share in the still drinks category in Lithuania. Details of the acquisition are as follows:

Acquiree’s carrying amount before Fair value acquisition adjustments Fair value ​ € million € million € million Trademark – 7.8 7.8 Water rights – 8.8 8.8 Property, plant and equipment 2.4 0.4 2.8 Inventories 0.1 – 0.1 Other current assets 1.1 – 1.1 Short-term borrowings (1.0) – (1.0) Other current liabilities (0.7) – (0.7) Deferred tax liabilities – (2.6) (2.6) Net identifiable assets acquired 1.9 14.4 16.3 Goodwill arising on acquisition ​ ​ 3.2 Cash paid to former shareholders ​ ​ 19.5

The acquisition resulted in the Group recording €3.2m of goodwill, €7.8m of trademark and €8.8m of water rights in its Developing markets segment. The goodwill arising from the acquisition of Neptūno Vandenys, UAB is attributed to expected future cash flows (including the effect of synergies) in excess of the value of net identifiable assets. The acquired business contributed net sales revenue of €3.8m and net profit of €1.4m to the Group for the period from 1 April 2016 to 31 December 2016. If the acquisition had occurred on 1 January 2016, consolidated Group revenue and consolidated Group profit after tax for year ended 31 December 2016 would have been higher by €1.0m and €0.5m respectively.

172 Coca-Cola HBC 2017 Integrated Annual Report In December 2016, TCCC acquired 50% of the share capital of Neptūno Vandenys, UAB for a total consideration of €10.3m, of which Strategic Report €9.8m was received in 2016 and the remaining in 2017 and is included in line ‘Net receipts from equity investments’ in the consolidated cash flow statement. This transaction resulted in a joint venture between the Group and TCCC. The gain on the transaction was immaterial. During 2017, following the successful completion of the reorganisation of Neptūno Vandenys, UAB joint venture with TCCC, the Group obtained control over net assets of the joint venture amounting to €3.5m, with a corresponding decrease in the carrying amount of the investment in the joint venture (refer to Note 15a).

23. Financial risk management and financial instruments

Accounting policies Corporate Governance Derivative financial instruments The Group uses derivative financial instruments, including currency, commodity and interest rate derivatives, to manage currency, commodity price and interest rate risk associated with the Group’s underlying business activities. The Group does not enter into derivative financial instruments for trading activity purposes. All derivative financial instruments are initially recognised on the balance sheet at fair value and are subsequently remeasured at their fair value. Changes in the fair value of derivative financial instruments are recognised at each reporting date either in the income statement or in equity, depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or a cash flow hedge. Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if:

a) their economic characteristics and risks are not closely related to those of the host contracts; Financial Statements b) the host contracts are not designated as at fair value through profit or loss, and c) a separate instrument with the same terms as the embedded derivative meets the definition of a derivative. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss. All derivative financial instruments that are not part of an effective hedging relationship (undesignated hedges) are classified as assets or liabilities at fair value through profit or loss (‘FVTPL’). At the inception of a hedge transaction the Group documents the relationship between the hedging instrument and the hedged item, as well as its risk management objective and strategy for undertaking the hedge transaction. This process includes linking the derivative Swiss Statutory Reporting financial instrument designated as a hedging instrument to the specific asset, liability, firm commitment or forecast transaction. Both at the hedge inception and on an ongoing basis, the Group assesses and documents whether the derivative financial instrument used in the hedging transaction is highly effective in offsetting changes in fair value or cash flow of the hedged item. Changes in the fair values of derivative financial instruments that are designated and qualify as fair value hedges and are effective, are recorded in the income statement, together with the changes in the fair values of the hedged items that relate to the hedged risks. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled to the income statement as the related asset acquired or liability assumed affects the income statement. Changes in the fair values of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise. Supplementary Information Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement. Regular purchases and sales of investments are recognised on the trade date, which is the day the Group commits to purchase or sell. The investments are recognised initially at fair value plus transaction costs, except in the case of FVTPL. For investments traded in active markets, fair value is determined by reference to stock exchange quoted bid prices. For other investments, fair value is estimated by reference to the current market value of similar instruments or by reference to the discounted cash flows of the underlying net assets.

Coca-Cola HBC 2017 Integrated Annual Report 173 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23. Financial risk management and financial instruments continued

Financial risk factors The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, commodity price risk, interest rate risk), credit risk, liquidity risk and capital risk. The Group’s overall risk management programme focuses on the volatility of financial markets and seeks to minimise potential adverse effects on the Group’s cash flows. The Group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by Group Treasury in a controlled manner, consistent with the Board of Directors’ approved policies. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s subsidiaries. The Board of Directors has approved the Treasury Policy which provides the control framework for all treasury and treasury‑related transactions.

Market risk a) Foreign currency risk The Group is exposed to the effect of foreign currency risk on future transactions, recognised monetary assets and liabilities that are denominated in currencies other than the local entity’s functional currency, as well as net investments in foreign operations. Foreign currency forward, option and future contracts are used to hedge a portion of the Group’s foreign currency risk. The majority of the foreign currency forward, option and future contracts have maturities of less than one year after the balance sheet date. The foreign currency risk arising from the investment in foreign operations is not hedged. Management has set up a policy that requires Group companies to manage their foreign exchange risk against their functional currency. To manage their foreign exchange risk arising from future transactions and recognised monetary assets and liabilities, entities in the Group use foreign currency forward, option and future contracts transacted by Group Treasury. Group Treasury’s risk management policy is to hedge, on an average coverage ratio basis, between 25% and 80% of anticipated cash flows for the next 12 months by using a layer strategy and 100% of balance sheet re-measurement risk in each major foreign currency for which hedging is applicable. Each subsidiary designates contracts with Group Treasury as fair value hedges or cash flow hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific monetary assets, monetary liabilities or future transactions on a gross basis. The following tables present details of the Group’s sensitivity to reasonably possible increases and decreases in the Euro and US dollar against the relevant foreign currencies. In determining reasonable possible changes, the historical volatility over a 12-month period of the respective foreign currencies in relation to the Euro and the US dollar has been considered. The sensitivity analysis determines the potential gains and losses in the income statement or equity arising from the Group’s foreign exchange positions as a result of the corresponding percentage increases and decreases in the Group’s main foreign currencies relative to the Euro and the US dollar. The sensitivity analysis includes outstanding foreign currency denominated monetary items, external loans, and loans between operations within the Group where the denomination of the loan is in a currency other than the functional currency of the local entity. 2017 exchange risk sensitivity to reasonably possible changes in the Euro against relevant other currencies ​ ​ Euro strengthens againstlocal currency Euro weakens against local currency % historical Loss/(gain) in income (Gain)/loss (Gain)/loss in income Loss/(gain) volatility over a statement in equity statement in equity ​ 12-month period € million € million € million € million Armenian dram 7.26% (0.5) – 0.6 – Bulgarian lev 0.59% (0.1) – 0.1 – Croatian kuna 1.95% 0.1 (0.1) (0.1) 0.1 Czech koruna 3.46% (1.1) (0.3) 1.2 0.3 Hungarian forint 3.54% 0.4 (0.3) (0.4) 0.3 FYROM dinar 4.06% – – 0.1 – Moldovan leu 7.76% (0.2) 0.6 0.2 (0.7) Nigerian naira 22.76% 4.4 – (6.9) – Polish zloty 4.56% (0.2) (1.9) 0.2 2.1 Romanian leu 2.83% 0.4 (1.2) – 0.4 Russian rouble 12.10% 0.6 (3.3) 2.0 0.7 Serbian dinar 2.24% 0.1 – – – Swiss franc 4.89% 0.6 (1.1) (0.6) 1.2 UK sterling 8.17% 0.2 0.2 (0.2) (0.2) Ukrainian hryvnia 10.25% 1.0 – (1.3) – US dollar 7.34% (0.5) 0.3 0.6 (0.3) ​ ​ 5.2 (7.1) (4.5) 3.9

174 Coca-Cola HBC 2017 Integrated Annual Report 2017 exchange risk sensitivity to reasonably possible changes in the US dollar against relevant other currencies Strategic Report ​ ​ US dollar strengthens against local currency US dollar weakens against local currency % historical Loss/(gain) in income (Gain)/loss Loss/(Gain) in income Loss/(gain) volatility over a statement in equity statement in equity ​ 12-month period € million € million € million € million Bulgarian lev 7.28% 0.1 – (0.1) – Euro 7.34% 1.6 – (1.8) – Hungarian forint 8.74% 0.1 – (0.1) – Nigerian naira 21.07% (1.7) – 2.0 – Romanian leu 7.65% 0.2 – (0.3) – Russian rouble 11.04% 2.7 (9.7) 1.1 5.1 Serbian dinar 7.49% (0.1) – 0.1 – Corporate Governance Ukrainian hryvnia 6.68% 0.1 – (0.1) – ​ ​ 3.0 (9.7) 0.8 5.1

2016 exchange risk sensitivity sensitivity to reasonably possible changes in the Euro against relevant other currencies ​ ​ Euro strengthens against local currency Euro weakens against local currency % historical Loss/(gain) in income (Gain)/loss (Gain)/loss in income Loss/(gain) volatility over a statement in equity statement in equity ​ 12-month period € million € million € million € million Armenian dram 8.94% (0.3) – 0.3 – Belarusian rouble 14.59% (1.0) – 1.4 – Bulgarian lev 0.70% (0.2) – 0.2 – Croatian kuna 1.63% – (0.1) – 0.2 Financial Statements Czech koruna 0.69% (0.1) – 0.1 – Hungarian forint 4.91% 0.2 (0.5) (0.3) 0.5 Moldovan leu 9.90% – 0.7 – (0.9) Nigerian naira 43.27% 11.1 – (28.0) – Polish zloty 7.29% 0.1 (1.8) (0.1) 2.1 Romanian leu 2.58% 0.1 (0.5) (0.1) 0.6 Russian rouble 20.12% (2.2) (4.0) 3.2 6.5 Serbian dinar 2.73% 0.2 – (0.3) – Swiss franc 4.47% 0.3 (1.5) (0.3) 1.6 UK sterling 11.91% 1.2 0.4 (1.5) (0.5)

Ukrainian hryvnia 14.84% 1.3 – (1.7) – Swiss Statutory Reporting US dollar 8.29% (0.5) 0.2 0.6 (0.2) ​ ​ 10.2 (7.1) (26.5) 9.9

2016 exchange risk sensitivity to reasonably possible changes in the US dollar against relevant other currencies ​ ​ US dollar strengthens against local currency US dollar weakens against local currency % of historical Loss/(gain) in income (Gain)/loss (Gain)/loss in income Loss/(gain) volatility over a statement in equity statement in equity ​ 12-month period € million € million € million € million Euro 8.29% 1.8 – (2.1) – Hungarian forint 9.79% 0.1 – (0.2) – Nigerian naira 38.95% (1.9) – 1.0 –

Russian rouble 19.53% (0.1) (9.3) (0.6) 15.4 Supplementary Information Serbian dinar 8.46% 0.1 – (0.1) – Ukrainian hryvnia 11.80% 0.4 – (0.5) – ​ ​ 0.4 (9.3) (2.5) 15.4

Coca-Cola HBC 2017 Integrated Annual Report 175 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23. Financial risk management and financial instruments continued b) Commodity price risk The Group is affected by the volatility of certain commodity prices (being mainly sugar, aluminium, aluminium premium, PET and gas oil) in relation to certain raw materials necessary for the production of the Group’s products. Due to the significantly increased volatility of commodity prices, the Group’s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation. Although the Group continues to contract prices with suppliers in advance, to reduce its exposure to the effect of short-term changes in the price of sugar, aluminium, aluminium premium, gas oil and PET the Group hedges the market price of sugar, aluminium, aluminium premium and gas oil using commodity swap contracts based on a rolling 36-month forecast. The Group Treasury’s Risk management policy is to hedge a minimum of 25% and a maximum of 80% of commodity exposure for the next 12 months except for PET where no minimum coverage is required and the maximum is at 50% for the first year. The following table presents details of the Group’s income statement and equity sensitivity to increases and decreases in sugar, aluminium, aluminium premium and gas oil prices. The table does not show the sensitivity to the Group’s total underlying commodity exposure or the impact of changes in volumes that may arise from increase or decrease in the respective commodity prices. The sensitivity analysis determines the potential effect on profit or loss and equity arising from the Group’s commodity swap contract positions as a result of the reasonably possible increases or decreases of the respective commodity price. 2017 commodity price risk sensitivity to reasonably possible changes in the commodity price of relevant commodities Commodity price increases with Commodity price decreases with ​ ​ all other variables held constant all other variables held constant % historical (Gain)/loss Loss/(gain) volatility over a in income (Gain)/loss in income Loss/(gain) 12-month period per statement in equity statement in equity ​ contract maturity € million € million € million € million Sugar 19.3% (8.8) – 8.8 – Aluminium 15.4% (5.2) (1.1) 5.2 1.1 Aluminium Premium 18.0% (0.3) – 0.3 – Gas oil 22.7% (2.2) – 2.2 – ​ ​ (16.5) (1.1) 16.5 1.1

2016 commodity price risk sensitivity to reasonably possible changes in the commodity price of relevant commodities Commodity price increases with Commodity price decreases with ​ ​ all other variables held constant all other variables held constant % historical (Gain)/loss Loss/(gain) volatility over a in income (Gain)/loss in income Loss/(gain) 12-month period per statement in equity statement in equity ​ contract maturity € million € million € million € million Sugar 19.2% (12.4) – 12.4 – Aluminium 16.4% (6.7) (1.1) 6.7 1.1 Aluminium Premium 19.2% (0.4) – 0.4 – Gas oil 41.0% (6.5) – 6.5 – ​ ​ (26.0) (1.1) 26.0 1.1 c) Interest rate risk The sensitivity analysis in the following table has been determined based on exposure to interest rates of both derivative and non- derivative instruments existing at the balance sheet date and assuming constant foreign exchange rates. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis point increase or decrease for 2017 (2016:50 basis point) represents management’s assessment of a reasonably possible change in interest rates. Interest rate risk sensitivity to reasonably possible changes in interest rates 2017 2016 ​ € million € million Loss/(gain) Loss/(gain) in income (Gain)/loss in income (Gain)/loss ​ statement In equity statement In equity Increase in basis points 0.1 – – – Decrease in basis points (0.1) – – –

176 Coca-Cola HBC 2017 Integrated Annual Report Credit risk Strategic Report Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its obligations under the contract or arrangement. The Group has limited concentration of credit risk across trade and financial counterparties. Credit policies are in place and the exposure to credit risk is monitored on an ongoing basis. The Group’s maximum exposure to credit risk in the event that counterparties fail to perform their obligations at 31 December 2017 in relation to each class of recognised financial asset is the carrying amount of those assets as indicated on the balance sheet. Under the credit policies, before accepting any new credit customers, the Group investigates the potential customer’s credit quality, using either external agencies and in some cases bank references and/or historic experience, and defines credit limits for each customer. Customers that fail to meet the Group’s benchmark credit quality may transact with the Group only on a prepayment or cash basis. Customers are reviewed on an ongoing basis and credit limits are adjusted accordingly. There is no significant concentration of credit risk with regards to loans, trade and other receivables as the Group has a large number of customers which are internationally dispersed. Corporate Governance The Group has policies that limit the amount of credit exposure to any single financial institution. The Group only undertakes investment and derivative transactions with banks and financial institutions that have a minimum credit rating of ‘BBB-’ from Standard & Poor’s and ‘Baa3’ from Moody’s. The Group also uses Credit Default Swaps of a counterparty in order to measure in a timelier way the creditworthiness of a counterparty and set up its counterparties in tiers in order to assign maximum exposure and tenor per tier. If the Credit Default Swaps of certain counterparty exceed 400 basis points the Group will stop trading derivatives with that counterparty and will try to cancel any deposits on a best-effort basis. In addition, the Group regularly makes use of time deposits to invest excess cash balances and to diversify its counterparty risk. As at 31 December 2017, an amount of €476.8m (2016: € 243.5m) is invested in time deposits (refer to Note 24).

Liquidity risk The Group actively manages liquidity risk to ensure there are sufficient funds available for any short-term and long-term commitments. Financial Statements Bank overdrafts and bank facilities, both committed and uncommitted, are used to manage this risk. The Group manages liquidity risk by maintaining adequate cash reserves and committed banking facilities, access to the debt and equity capital markets, and by continuously monitoring forecasted and actual cash flows. In Note 24, the undrawn facilities that the Group has at its disposal to manage liquidity risk are discussed under the headings ‘commercial paper programme’ and ‘committed credit facilities’. The following tables detail the Group’s remaining contractual maturities for its financial liabilities. The tables include both interest and principal undiscounted cash flows, assuming that interest rates remain constant from 31 December 2017.

Up to One to Two to Over one year two years five years five years ​ € million € million € million € million Borrowings 203.3 41.6 887.7 668.6 Swiss Statutory Reporting Derivative liabilities 4.5 0.9 – – Trade and other payables 1,458.8 0.2 1.0 5.3 As at 31 December 2017 1,666.6 42.7 888.7 673.9

Up to One to Two to Over one year two years five years five years ​ € million € million € million € million Borrowings 193.4 43.7 903.6 691.9 Derivative liabilities 14.2 1.0 0.3 – Trade and other payables 1,488.2 1.3 0.2 6.7 As at 31 December 2016 1,695.8 46.0 904.1 698.6 Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 177 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23. Financial risk management and financial instruments continued

Capital risk

The Group monitors its financial capacity and credit ratings by reference to a number of key financial ratios including net debt to comparable adjusted EBITDA, which provides a framework within which the Group's capital base is managed. This ratio is calculated as net debt divided by comparable adjusted EBITDA. Adjusted EBITDA is calculated by adding back to operating profit the depreciation and impairment of property, plant and equipment, the amortisation and impairment of intangible assets, the employee share option and performance share costs and other non-cash items, if any. Comparable adjusted EBITDA refers to adjusted EBITDA excluding restructuring expenses and the unrealised gains or losses resulting from the mark-to-market valuation of derivatives and embedded derivatives related to commodity hedging. Refer to Note 24 for definition of net debt.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may increase or decrease debt, issue or buy back shares, adjust the amount of dividends paid to shareholders, or return capital to shareholders. The Group’s goal is to maintain a conservative financial profile. This is evidenced by the credit ratings maintained with Standard & Poor’s and Moody’s. In April 2017, Standard & Poor’s affirmed Coca-Cola HBC’s ‘BBB+’ long-term, ‘A2’ short-term corporate credit ratings and positive outlook. The corporate credit ratings by Moody’s remained unchanged, ‘Baa1’ long-term, ‘P2’ short-term and stable outlook after the latest assessment in October 2017. The Group’s medium-to long-term target is to maintain the net debt to comparable adjusted EBITDA ratio within a 1.5 to 2.0 range. The ratios as at 31 December were as follows:

2017 2016 ​ € million € million Net debt (refer to Note 24) 751.8 1,051.4 Operating profit 589.8 506.3 Depreciation and impairment of property, plant and equipment 316.8 332.4 Amortisation of intangible assets 0.4 0.4 Employee share options and performance shares 20.8 8.1 Other non-cash items included in operating income (0.3) (1.3) Adjusted EBITDA 927.5 845.9 Restructuring expenses 19.5 19.9 Unrealised commodity derivatives 2.3 (26.5) Total comparable adjusted EBITDA 949.3 839.3 Net debt / comparable adjusted EBITDA ratio 0.79 1.25

Hedging activity a) Cash flow hedges The fair values of derivative financial instruments as at 31 December designated as cash flow hedges were:

​ Contracts with positive fair values Contracts with negative fair values 2017 2016 2017 2016 ​ € million € million € million € million Foreign currency forward contracts 0.7 1.0 (1.6) (4.0) Foreign currency option contracts 2.3 0.3 – – Commodity swap contracts 0.6 0.4 – (0.1) Total contracts 3.6 1.7 (1.6) (4.1) Cash flows from the Group’s foreign currency cash flow hedges at 31 December 2017 are expected to occur and, accordingly, affect profit or loss in 2018; cash flows from the Group’s commodity swap contracts, are expected to occur and affect profit or loss between 2018 and 2020.The net amount reclassified from other comprehensive income to the income statement for the year amounted to a €6.3m loss

178 Coca-Cola HBC 2017 Integrated Annual Report (2016: €12.8m loss), out of which €6.4m loss was recorded in interest expense (2016: €5.2m loss) and €0.1m gain was recorded in cost of Strategic Report goods sold (2016: €7.6m loss). b) Fair value hedges As at 31 December 2017, the fair values of derivative financial instruments were €nil (2016: €1.7m liability). The fair value net loss of the foreign currency forward and option contracts used as fair value hedging instruments was €0.5 loss in 2017 (2016: €4.2m net loss). c) Undesignated hedges The fair values of derivative financial instruments as at 31 December which economically hedge Group’s risks and for which hedge accounting has not been applied, were:

​ Contracts with positive fair values Contracts with negative fair values Corporate Governance 2017 2016 2017 2016 ​ € million € million € million € million Foreign currency forward contracts 0.9 1.5 (1.6) (4.6) Foreign currency option contracts 0.9 – – – Foreign currency future contracts 1.2 0.3 – – Embedded derivatives 2.6 3.3 – – Commodity swap contracts 7.2 9.2 (2.2) (5.1) Total contracts 12.8 14.3 (3.8) (9.7)

The net gains on foreign currency and commodity derivative contracts at fair value through profit and loss (for which hedge accounting was not applied) amounted to a €1.7m gain (2016: €59.1m gain) of which a €4.6m loss was recorded in cost of goods sold (2016: €17.4m gain) and a €6.3m gain in operating expenses (2016: €41.7m gain). Financial Statements

Derivative financial instruments The derivative financial instruments are included in the Group’s balance sheet as follows:

​ Assets Liabilities 2017 2016 2017 2016 ​ € million € million € million € million Current ​ ​ ​ ​ Foreign currency forward contracts 1.6 2.5 (3.2) (10.3) Foreign currency option contracts 3.2 0.3 – – Foreign currency future contracts 1.2 0.3 – – Commodity swap contracts 6.0 4.8 (1.3) (3.9) Swiss Statutory Reporting Total current 12.0 7.9 (4.5) (14.2) Non-current ​ ​ ​ ​ Commodity swap contracts 1.8 4.8 (0.9) (1.3) Embedded derivatives 2.6 3.3 – – Total non-current 4.4 8.1 (0.9) (1.3) Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 179 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23. Financial risk management and financial instruments continued

Financial instruments categories Categories of financial instruments as at 31 December were as follows (in € million): 2017 ​ ​ ​ ​ ​ ​ ​ Analysis of total assets Derivatives designated Total Loans and Assets at as hedging Held-to- Available- current and Assets receivables FVTPL instruments maturity for‑sale non-current Current Non-current Investments – – – 151.8 3.7 155.5 150.9 4.6 Derivative financial instruments – 12.8 3.6 – – 16.4 12.0 4.4 Trade and other receivables excluding prepayments 896.6 – – – – 896.6 893.9 2.7 Cash and cash equivalents 723.5 – – – – 723.5 723.5 – Total 1,620.1 12.8 3.6 151.8 3.7 1,792.0 1,780.3 11.7

​ ​ ​ ​ ​ Analysis of total liabilities Liabilities Derivatives held at designated Total amortised Liabilities as hedging current and Liabilities cost at FVTPL instruments non-current Current Non-current Trade and other payables excluding provisions and deferred income 1,465.3 – – 1,465.3 1,458.6 6.7 Borrowings 1,626.2 – – 1,626.2 166.4 1,459.8 Derivative financial instruments – 3.8 1.6 5.4 4.5 0.9 Total 3,091.5 3.8 1.6 3,096.9 1,629.5 1,467.4

2016 ​ ​ ​ ​ ​ ​ ​ Analysis of total assets Derivatives designated Total Loans and Assets at as hedging Held-to- Available- current and Assets receivables FVTPL instruments maturity for‑sale non-current Current Non-current Investments – – – 0.9 3.6 4.5 – 4.5 Derivative financial instruments – 14.3 1.7 – – 16.0 7.9 8.1 Trade and other receivables excluding prepayments 957.4 – – – – 957.4 954.8 2.6 Cash and cash equivalents 573.2 – – – – 573.2 573.2 – Total 1,530.6 14.3 1.7 0.9 3.6 1,551.1 1,535.9 15.2

​ ​ ​ ​ ​ Analysis of total liabilities Derivatives Liabilities held designated Total at amortised Liabilities as hedging current and Liabilities cost at FVTPL instruments non-current Current Non-current Trade and other payables excluding provisions and deferred income 1,496.4 – – 1,496.4 1,488.2 8.2 Borrowings 1,624.6 – – 1,624.6 156.5 1,468.1 Derivative financial instruments – 9.7 5.8 15.5 14.2 1.3 Total 3,121.0 9.7 5.8 3,136.5 1,658.9 1,477.6

Foreign currency derivatives The net notional principal amounts of the outstanding foreign currency forward contracts at 31 December 2017 totalled €190.5m (2016: €289.9m). The net notional principal amounts of the outstanding foreign currency option contracts at 31 December 2017 totalled €91.2m (2016: €13.8m). The net notional principal amounts of the outstanding foreign currency future contracts at 31 December 2017 totalled €5.6m (2016: €7.6m).

180 Coca-Cola HBC 2017 Integrated Annual Report Commodity swap contracts Strategic Report The notional principal amounts of the outstanding commodity swap contracts at 31 December 2017 totalled €92.6m (2016: €125.2m).

Forward starting swap contracts The Group entered into forward starting swap contracts of €500.0m in 2014 to hedge the interest rate risk related to its Euro denominated forecasted issuance of fixed rate debt in March 2016. In August 2015 the Group entered into additional forward starting swap contracts of €100.0m. In March 2016 the forward starting swap contracts were settled and at the same time the new note was issued, the accumulated loss of €55.4m recorded in other comprehensive income is being amortised to the income statement over the term of the new note (refer to Note 24).

Embedded derivatives Corporate Governance During 2015 the Group recognised embedded derivatives whose risks and economic characteristics were not considered to be closely related to the commodity contract in which they were embedded. The fair value of the embedded derivatives as at 31 December 2017 amounted to a financial asset of €2.6m (2016: €3.3m).

Fair values of financial assets and liabilities For financial instruments such as cash, deposits, debtors and creditors, investments, loans payable to related parties, short-term borrowings (excluding the current portion of bonds and notes payable) and other financial liabilities (other than bonds and notes payable), carrying values are a reasonable approximation of their fair values. According to the fair value hierarchy, the financial instruments measured at fair value are classified as follows:

Level 1 Financial Statements The fair value of available-for-sale listed equity securities is based on quoted market prices at the reported date. The fair value of bonds is based on quoted market prices at the recorded date.

Level 2 The fair value of foreign currency forward, option and future contracts, commodity swap contracts, bonds and notes payable, interest rate swap contracts, forward starting swap contracts, embedded foreign currency derivatives and cross currency swap contracts is determined by using valuation techniques. These valuation techniques maximise the use of observable market data. The fair value of the foreign currency forward, option and future contracts, commodity swap contracts, embedded foreign currency derivatives and cross currency swap contracts is calculated by reference to quoted forward exchange, deposit rates and forward rate curve of the underlying commodity at the reported date for contracts with similar maturity dates. The fair value of interest rate option contracts is calculated by reference to the Black-Scholes valuation model and implied volatilities. The fair value of interest rate swap contracts is determined as the difference in the present value of the future interest cash inflows and outflows based on observable yield curves. Swiss Statutory Reporting

Level 3 The fair value of available-for-sale unlisted investments is determined through the use of estimated discounted cash flows. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 181 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

23. Financial risk management and financial instruments continued The following table provides the fair value hierarchy in which fair value measurements are categorised for assets and liabilities measured at fair value as at 31 December 2017: Level 1 Level 2 Level 3 Total ​ € million € million € million € million Financial assets at FVTPL ​ ​ ​ ​ Foreign currency forward contracts – 0.9 – 0.9 Foreign currency option contracts – 0.9 – 0.9 Embedded derivatives – 2.6 – 2.6 Foreign currency futures contracts – 1.2 – 1.2 Commodity swap contracts – 7.2 – 7.2 Derivative financial assets used for hedging ​ ​ ​ ​ Cash flow hedges ​ ​ ​ ​ Foreign currency forward contracts – 0.7 – 0.7 Foreign currency option contracts – 2.3 – 2.3 Commodity swap contracts – 0.6 – 0.6 Available-for-sale financial assets ​ ​ ​ ​ Equity securities 1.0 – 2.7 3.7 Total financial assets 1.0 16.4 2.7 20.1 Financial liabilities at FVTPL ​ ​ ​ ​ Foreign currency forward contracts – (1.6) – (1.6) Commodity swap contracts – (2.2) – (2.2) Derivative financial liabilities used for hedging ​ ​ ​ ​ Cash flow hedges ​ ​ ​ ​ Foreign currency forward contracts – (1.6) – (1.6) Total financial liabilities – (5.4) – (5.4)

There were no transfers between Level 1, Level 2 and Level 3 in the period.

182 Coca-Cola HBC 2017 Integrated Annual Report The following table provides the fair value hierarchy in which fair value measurements are categorised for assets and liabilities measured at Strategic Report fair value as at 31 December 2016: Level 1 Level 2 Level 3 Total ​ € million € million € million € million Financial assets at FVTPL ​ ​ ​ ​ Foreign currency forward contracts – 1.5 – 1.5 Embedded derivatives – 3.3 – 3.3 Foreign currency future contracts – 0.3 – 0.3 Commodity swap contracts – 9.2 – 9.2 Derivative financial assets used for hedging ​ ​ ​ ​ Cash flow hedges ​ ​ ​ ​

Foreign currency forward contracts – 1.0 – 1.0 Corporate Governance Foreign currency option contracts – 0.3 – 0.3 Commodity swap contracts – 0.4 – 0.4 Available-for-sale financial assets ​ ​ ​ ​ Equity securities 0.9 – 2.7 3.6 Total financial assets 0.9 16.0 2.7 19.6 Financial liabilities at FVTPL ​ ​ ​ ​ Foreign currency forward contracts – (4.6) – (4.6) Commodity swap contracts – (5.1) – (5.1) Derivative financial liabilities used for hedging ​ ​ ​ ​ Fair value hedges ​ ​ ​ ​ Financial Statements Foreign currency forward contracts – (1.7) – (1.7) Cash flow hedges ​ ​ ​ ​ Foreign currency forward contracts – (4.0) – (4.0) Commodity swap contracts – (0.1) – (0.1) Total financial liabilities – (15.5) – (15.5)

During 2016 the Group acquired an equity investment of €2.2m classified within Level 3. There were no transfers between Level 1, Level 2 and Level 3 in the period. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 183 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24. Net debt

Accounting policy Borrowings are initially recognised at the fair value net of transaction costs incurred. After initial recognition, all interest-bearing borrowings are subsequently measured at amortised cost. Amortised cost is calculated using the effective interest rate method whereby any discount, premium or transaction costs associated with a borrowing are amortised to the income statement over the borrowing period. Refer also to Note 14 for accounting policy on finance leases. Cash and cash equivalents comprise cash balances and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of change in value. Bank overdrafts are classified as short-term borrowings in the balance sheet and for the purpose of the cash flow statement. Time deposits which do not meet the definition of cash and cash equivalents are classified as short-term investments, in the held-to-maturity category. Net debt is defined as current borrowings plus non-current borrowings less cash and cash equivalents, and time deposits classified as other financial assets.

Net debt for the year ended 31 December comprised:

2017 2016 ​ € million € million Current borrowings 166.4 156.5 Non-current borrowings 1,459.8 1,468.1 Less: Cash and cash equivalents (723.5) (573.2) Less: Other financial assets – time deposits (150.9) – Net debt 751.8 1,051.4 a) Borrowings The Group held the following borrowings as at 31 December:

2017 2016 ​ € million € million Commercial paper 120.0 108.5 Loan payable to related parties (refer to Note 26) 4.3 4.1 Other Borrowings 34.5 36.4 ​ 158.8 149.0 Obligations under finance leases falling due within one year 7.6 7.5 Total borrowings falling due within one year 166.4 156.5 Borrowings falling due within two to five years ​ ​ Bonds, bills and unsecured notes 797.2 796.0 Borrowings falling due in more than five years ​ ​ Bonds, bills and unsecured notes 596.3 595.8 ​ 1,393.5 1,391.8 Obligations under finance leases falling due in more than one year 66.3 76.3 Total borrowings falling due after one year 1,459.8 1,468.1 Total borrowings 1,626.2 1,624.6

184 Coca-Cola HBC 2017 Integrated Annual Report Reconciliation of liabilities to cash flows arising from financing activities: Strategic Report

​ Borrowings Finance leases ​ ​ Derivative due within due in more due within due in more assets/ ​ one year than one year one year than one year (liabilities)​ Total Balance at 1 January 2017 149.0 1,391.8 7.5 76.3 – 1,624.6 Cash flows ​ ​ ​ ​ ​ ​ Proceeds from borrowings 82.2 – – – – 82.2 Repayments of borrowings (83.8) – – – – (83.8) Principal repayments of finance lease obligations – – (7.2) – – (7.2) Interest paid (30.7) – (6.2) – – (36.9) Payments for settlement of derivatives – – – – (3.1) (3.1) Corporate Governance Total cash flows (32.3) – (13.4) – (3.1) (48.8) Finance leases increase – – 0.1 0.8 – 0.9 Effect of changes in exchange rates (0.4) – (0.2) (3.5) – (4.1) Other non-cash movements 42.5 1.7 13.6 (7.3) 3.1 53.6 Balance at 31 December 2017 158.8 1,393.5 7.6 66.3 – 1,626.2

Other non-cash movements include the impact from interest expense and remeasurement of derivatives.

Commercial paper programme In October 2013 the Group established a €1.0bn Euro-commercial paper programme (‘CP programme’) which was updated in September

2014 and then in May 2017, to further diversify its short-term funding sources. The Euro-commercial paper notes may be issued either as Financial Statements non-interest-bearing notes sold at a discount or as interest-bearing notes at a fixed or floating rate. All commercial paper issued under the CP programme must be repaid within 7 to 364 days. The CP programme has been granted the Short Term Euro Paper label (‘STEP’) and commercial paper is issued through Coca-Cola HBC’s 100%-owned subsidiary Coca-Cola HBC Finance B.V. and is fully, unconditionally and irrevocably guaranteed by Coca-Cola HBC AG. The outstanding amount under the CP programme as at 31 December 2017 was €120.0m (2016: €108.5m).

Committed credit facilities In June 2015, the Group replaced its then existing €500.0m syndicated revolving credit facility with a new €500.0m syndicated loan facility, provided by various financial institutions, expiring on 24 June 2020, with the option to be extended for one more year. In June 2016, the Company exercised its option and the banks agreed to extend the facility for one more year until 24 June 2021. This facility can be used for

general corporate purposes and carries a floating interest rate over EURIBOR and LIBOR. No amounts have been drawn under the Swiss Statutory Reporting syndicated loan facility since inception. The borrower in the syndicated loan facility is Coca-Cola HBC’s 100%-owned subsidiary Coca-Cola HBC Finance B.V. and it is fully, unconditionally and irrevocably guaranteed by Coca-Cola HBC AG and Coca-Cola HBC Holdings B.V. and not subject to any financial covenants.

Euro medium-term note programme In June 2013, the Group established a new €3.0bn Euro medium-term note programme (the ‘EMTN programme’). The EMTN programme was updated in September 2014 and again in September 2015. Notes are issued under the EMTN programme through Coca-Cola HBC’s 100%-owned subsidiary Coca-Cola HBC Finance B.V. and are fully, unconditionally and irrevocably guaranteed by Coca-Cola HBC AG. In June 2013, Coca Cola HBC Finance B.V. completed the issue of €800 million, 2.375%, seven-year fixed rate, Euro-denominated notes. The net proceeds of the new issue were used to repay the US$500m notes due in September 2013 and partially repay €183.0m of the

7.875% five-year fixed rate notes due in January 2014. Supplementary Information In March 2016, Coca-Cola HBC Finance B.V. completed the issue of a €600 million Euro-denominated fixed rate bond maturing in November 2024. The coupon rate of the new bond is 1.875% which, including the amortisation of the loss on the forward starting swap contracts over the term of the fixed rate bond, results in an effective interest rate of 2.99% (refer to Note 23). The net proceeds of the new issue were used to partially repay €214.6 million of the 4.25% seven-year fixed rate notes due in November 2016, the remaining €385.4m was repaid in November 2016 upon its maturity. As at 31 December 2017, a total of €1.4bn in notes issued under the EMTN programme were outstanding. The EMTN Programme has not been updated since September 2015 so further issues under the EMTN Programme are currently not possible pending a further update.

Coca-Cola HBC 2017 Integrated Annual Report 185 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24. Net debt continued

Summary of notes outstanding as at 31 December ​ ​ ​ ​ Book value Fair value 2017 2016 2017 2016 Notes Start date Maturity date Fixed coupon € million € million € million € million €800m 18 June 2013 18 June 2020 2.375% 797.2 796.0 841.5 855.9 €600m 10 March 2016 11 November 2024 1.875% 596.3 595.8 643.6 634.8 Total ​ ​ ​ 1,393.5 1,391.8 1,485.1 1,490.7

The fair values are within Level 1 of the fair value hierarchy.

Obligations under finance leases Future minimum lease payments under finance leases together with the present value of the net minimum lease payments as at 31 December, were as follows:

2017 2016 ​ € million € million Minimum Present value Minimum Present value ​ payments of payments payments of payments Less than one year 14.3 7.6 13.7 7.5 Later than one year but less than two years 11.3 6.5 13.5 7.7 Later than two years but less than three years 12.6 6.8 11.9 6.7 Later than three years but less than four years 12.5 7.3 11.9 7.1 Later than four years but less than five years 12.6 7.8 11.9 7.5 Later than five years 49.9 37.9 62.6 47.3 Total minimum lease payments 113.2 73.9 125.5 83.8 Future finance charges on finance leases (39.3) – (41.7) – Present value of minimum lease payments 73.9 73.9 83.8 83.8

Total borrowings at 31 December were held in the following currencies:

​ Current Non-current 2017 2016 2017 2016 ​ € million € million € million € million Euro 152.0 122.8 1,414.1 1,416.1 US dollar 11.0 4.5 24.1 28.4 UK sterling 1.3 1.3 9.2 10.9 Polish zloty 1.0 0.9 12.4 12.7 Croatian kuna 0.3 15.3 – – Russian rouble – 11.6 – – Other 0.8 0.1 – – Total borrowings 166.4 156.5 1,459.8 1,468.1 The carrying amounts of interest bearing borrowings held at fixed and floating interest rate as at 31 December 2017, as well as the weighted average interest rates and maturities of fixed rate borrowings, were as follows: Fixed Floating interest rate interest rate Total ​ € million € million € million Euro 1,537.3 28.8 1,566.1 US dollar 31.2 3.9 35.1 Polish zloty – 13.4 13.4 UK sterling – 10.5 10.5 Other 0.7 0.1 0.8​ Total interest bearing borrowings 1,569.2 56.7 1,625.9

Other borrowings of €0.3m (2016: €15.3m) are subject to factoring agreements, based on which the customers are liable to the interest being charged (refer to Note 17).

186 Coca-Cola HBC 2017 Integrated Annual Report Financial liabilities represent fixed and floating rate borrowings held by the Group. The Group’s policy is to hedge exposures to changes in Strategic Report the fair value of debt and interest rates by using a combination of cross-currency swap contracts, fixed-to-floating-rate interest rate swap contracts and interest rate option contracts. The weighted average interest rate of the fixed Euro liabilities is 2.4% and the weighted average maturity for which the interest is fixed is 4.1 years. b) Cash and cash equivalents Cash and cash equivalents as at 31 December comprise the following:

2017 2016 ​ € million € million Cash at bank, in transit and in hand 397.6 329.7 Short-term deposits 325.9 243.5

Total cash and cash equivalents 723.5 573.2 Corporate Governance

Cash and cash equivalents are held in the following currencies:

2017 2016 ​ € million € million Euro 568.6 400.7 Nigerian naira 82.8 110.7 UK sterling 14.5 6.6 Hungarian forint 10.6 6.1 Romanian leu 9.9 5.6 Russian rouble 9.8 11.7 Serbian dinar 7.2 9.1 Financial Statements Swiss franc 6.3 4.6 Ukrainian hryvnia 3.0 2.5 Czech koruna 2.3 2.1 Croatian kuna 1.8 0.7 US dollar 1.7 3.3 Moldovan leu​ 1.2 0.8 Belarusian rouble​ 1.1 1.4 Other 2.7 7.3 Total cash and cash equivalents 723.5 573.2 Swiss Statutory Reporting Time deposits of €150.9m, which do not meet the definition of cash and cash equivalents, are recorded as other financial assets. Cash and cash equivalents include an amount of €83.9m held by the Group’s subsidiary, Nigerian Bottling Company Ltd, (€82.8m equivalent in Nigerian naira and €1.1m equivalent in other currencies). Furthermore, this amount includes €12.9m equivalent Nigerian naira, which relates to the outstanding balance of the bank account held for the repayment of its former minority shareholders, following the 2011 acquisition of non-controlling interests. Cash and cash equivalents held by our subsidiaries in Greece of €16.6m were subject to capital controls as at 31 December 2017. The amount of dividends payable to the Company by its operating subsidiaries is subject to, among other restrictions, general limitations imposed by the corporate laws and exchange control restrictions of the respective jurisdictions where those subsidiaries are organised and operate. Also, there are fund transfer restrictions in certain countries in which we operate, in particular Belarus, Greece, Serbia and

Ukraine, where these restrictions do not have a material impact on the Group’s liquidity, as the amounts of cash and cash equivalents held Supplementary Information in such countries are generally retained for capital expenditure, working capital and dividend distribution purposes. Fund transfer restrictions are also applicable in Nigeria; furthermore, the tight liquidity in 2016 and the first quarter of 2017 in the foreign exchange market in Nigeria has significantly limited our ability to execute payments in foreign currency, leading to a temporarily high Nigerian naira cash balance. We expect all this excess cash to be fully utilised to fund capital expenditure in 2018. Intra group dividends paid by certain of our subsidiaries are also subject to withholding taxes.

Coca-Cola HBC 2017 Integrated Annual Report 187 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

25. Equity

Accounting policies

Share capital Coca-Cola HBC has only one class of shares, ordinary shares. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded to the share premium reserve. Incremental external costs directly attributable to the issue of new shares or to the process of returning capital to shareholders are recorded in equity as a deduction, net of tax, in the share premium reserve.

Dividends Dividends are recorded in the Group’s consolidated financial statements in the period in which they are approved by the Group’s shareholders. a) Share capital, share premium and Group reorganisation reserve Number Group of shares Share Share reorganisation (authorised capital premium reserve and issued) € million € million € million Balance as at 1 January 2016 368,141,297 2,000.1 5,028.3 (6,472.1) Shares issued to employees exercising stock options (refer to Note 27) 1,499,341 9.1 12.5 – Cancellation of shares (3,000,000) (18.4) (40.1) – Dividends – – (146.1) – Balance as at 31 December 2016 366,640,638 1,990.8 4,854.6 (6,472.1) Shares issued to employees exercising stock options (refer to Note 27) 4,122,401 24.3 46.7 – Dividends – – (162.0) – Balance as at 31 December 2017 370,763,039 2,015.1 4,739.3 (6,472.1)

The Group reorganisation reserve relates to the impact from adjusting share capital, share premium and treasury shares to depict the respective statutory amounts of Coca-Cola HBC on 25 April 2013, together with the transaction costs incurred by the latter, relating primarily to the re-domiciliation of the Group and its admission to listing in the premium segment of the London Stock Exchange, following successful completion of the voluntary share exchange offer (refer also to Note 1). These transactions were treated as a reorganisation of an existing entity that has not changed the substance of the reporting entity. On 23 June 2015, the Annual General Meeting adopted a proposal for share buy-back of up to 3,000,000 ordinary shares of Coca-Cola HBC for the purpose of neutralising the dilution resulting from shares issues under Coca-Cola HBC’s equity compensation plans. The programme was completed in full during 2015 for a consideration of €58.5m. On 21 June 2016, the Annual General Meeting approved the proposal to reduce the share capital of Coca-Cola HBC AG by cancelling the 3,000,000 treasury shares acquired as part of the share buy-back programme described above. The respective reduction of the share capital was completed in September 2016. In 2017, the share capital of Coca-Cola HBC increased by the issue of 4,122,401 (2016: 1,499,341) new ordinary shares following the exercise of stock options pursuant to the Coca-Cola HBC AG’s employees’ stock option plan. Total proceeds from the issuance of the shares under the stock option plan amounted to €71.0m (2016: €21.6m). Following the above changes, as at 31 December 2017 the share capital of the Group amounted to €2,015.1m (2016: €1,990.8m) and comprised 370,763,039 shares with a nominal value of CHF 6.70 each. b) Dividends The shareholders of Coca-Cola HBC AG approved the 2015 dividend distribution of €0.40 per share at the Annual General Meeting held on 21 June 2016. The total dividend amounted to €146.1m and was paid on 26 July 2016. Of this, an amount of €1.4m related to shares held by the Group. The shareholders of Coca-Cola HBC AG approved the 2016 dividend distribution of €0.44 per share at the Annual General Meeting held on 20 June 2017. The total dividend amounted to €162.0m and was paid on 25 July 2017. Of this, an amount of €1.5m related to shares held by the Group. The Board of Directors of Coca-Cola HBC AG has proposed a €0.54 dividend per share in respect of 2017. If approved by the shareholders of Coca-Cola HBC AG, this dividend will be paid in 2018.

188 Coca-Cola HBC 2017 Integrated Annual Report c) Reserves Strategic Report The reserves of the Group at 31 December were as follows:

2017 2016 € million € million Treasury shares (71.3) (70.7) Exchange equalisation reserve (1,026.3) (801.8) Other reserves Hedging reserve, net (47.0) (55.3) Tax-free reserve 163.8 163.8 Statutory reserves 27.3 26.9 Stock option reserve 104.4 87.2 Available-for-sale financial assets valuation reserve, net 0.8 0.7 Corporate Governance Other 21.9 21.8 Total other reserves 271.2 245.1 Total reserves (826.4) (627.4)

Treasury shares Treasury shares held by the Group represent shares acquired following approval of share buy-back programmes, forfeited shares under the equity compensation plan operated by the Group as well as shares representing the initial ordinary shares of Coca-Cola HBC acquired from Kar-Tess Holding. In September 2016 the 3,000,000 treasury shares, acquired as part of the 2015 share buy-back programme for a consideration of €58.5m, were cancelled (refer also to section a) ‘Share capital, share premium and Group reorganisation reserve’). As at

31 December 2017, 3,445,060 treasury shares were held by the Group. Financial Statements

Exchange equalisation reserve The exchange equalisation reserve comprises all foreign exchange differences arising from the translation of the financial statements of entities with functional currencies other than the Euro.

Other reserves

Hedging reserve The hedging reserve reflects changes in the fair values of derivatives accounted for as cash flow hedges, net of the deferred tax related to such balances. Swiss Statutory Reporting Tax-free and statutory reserves The tax-free reserve includes investment amount exempt from tax according to incentive legislation, other tax-free income or income taxed at source. Statutory reserves are particular to the various countries in which the Group operates. The amount of statutory reserves of the parent entity, Coca-Cola HBC AG, is €nil. During 2017, an amount of €0.4m (2016: €6.9m) was reclassified to statutory reserves relating to the establishment of additional reserves by the Group’s subsidiaries.

Other reserves Other reserves are particular to the various countries in which the Group operates.

Stock option reserve Supplementary Information The stock option reserve represents the cumulative charge to the income statement for employee stock option and performance share awards (refer also to Note 27).

Coca-Cola HBC 2017 Integrated Annual Report 189 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

26. Related party transactions a) The Coca-Cola Company As at 31 December 2017, The Coca-Cola Company indirectly owned 23.0% (2016: 23.2%) of the issued share capital of Coca-Cola HBC. The Coca-Cola Company considers Coca-Cola HBC to be a ‘key bottler’ and has entered into bottlers’ agreements with Coca-Cola HBC in respect of each of the Group’s territories. All the bottlers’ agreements entered into by The Coca-Cola Company and Coca-Cola HBC are Standard International Bottlers’ (‘SIB’) agreements. The terms of the bottlers’ agreements grant Coca-Cola HBC the right to produce and the exclusive right to sell and distribute the beverages of The Coca-Cola Company in each of the countries in which the Group operates. Consequently, Coca-Cola HBC is obliged to purchase all concentrate for The Coca-Cola Company’s beverages from The Coca-Cola Company, or its designee, in the ordinary course of business. On 10 October 2012, The Coca-Cola Company agreed to extend the term of the bottlers’ agreements for further 10 years until 2023. The Coca-Cola Company owns or has applied for the trademarks that identify its beverages in each of the countries in which the Group operates. The Coca-Cola Company has authorised Coca-Cola HBC and certain of its subsidiaries to use the trademark ‘Coca-Cola’ in their corporate names. The below table summarises transactions with The Coca-Cola Company and its subsidiaries:

2017 2016 ​ € million € million Purchases of concentrate, finished goods and other items 1,379.9 1,319.4 Net contributions received for marketing and promotional incentives 83.9 91.2 Sales of finished goods and raw materials 14.3 10.8 Other income 6.1 4.4 Other expenses 3.6 3.5

The Coca-Cola Company makes discretionary marketing contributions to Coca-Cola HBC’s operating subsidiaries. The participation in shared marketing agreements is at The Coca-Cola Company’s discretion and, where co-operative arrangements are entered into, marketing expenses are shared. Such arrangements include the development of marketing programmes to promote The Coca-Cola Company’s beverages. Contributions received from The Coca-Cola Company for marketing and promotional incentives during the year amounted to €83.9m (2016: €91.2m): contributions made by The Coca-Cola Company to Coca-Cola HBC for price support and marketing and promotional campaigns in respect of specific customers in 2017 totalled €59.6m (2016: €66.0m), while contributions made by The Coca-Cola Company to Coca-Cola HBC for general marketing programmes in 2017 totalled €24.3m (2016: €25.2m). The Coca-Cola Company has also customarily made additional payments for marketing and advertising directly to suppliers as part of the shared marketing arrangements. The proportion of direct and indirect payments made at The Coca-Cola Company’s discretion, will not necessarily be the same from year to year. Other income primarily comprises rent and other items. Other expenses related to facility costs charged by The Coca-Cola Company and shared costs included in operating expenses. In December 2016 the Group sold 50% of its share in its subsidiary Neptūno Vandenys, UAB, to European Refreshments, a subsidiary of TCCC for a total consideration of €10.3m (refer to Note 22), of which €9.8m was received in 2016 and the remaining in 2017 and is included in line ‘Net receipts from equity investments’ in the consolidated cash flow statement. As at 31 December 2017, the Group had a total amount due from The Coca-Cola Company of €79.3m (2016: €94.3m), and a total amount due to The Coca-Cola Company of €260.2m (2016: €234.6m).

190 Coca-Cola HBC 2017 Integrated Annual Report b) Frigoglass S.A. (‘Frigoglass’), Kar-Tess Holding and AG Leventis (Nigeria) Plc Strategic Report Truad Verwaltungs AG, currently indirectly owns 48.6% of Frigoglass and 50.7% of AG Leventis (Nigeria) Plc and also indirectly controls Kar-Tess Holding, which holds approximately 23.0% (2016: 23.3%) of Coca-Cola HBC’s total issued share capital. The below table summarises transactions with the above entities:

2017 2016 Frigoglass & subsidiaries € million € million Purchases of coolers, cooler parts, glass bottles, crowns, raw materials and plastics 117.3 108.1 Maintenance and other expenses 18.1 19.6 AG Leventis (Nigeria) Plc ​ ​ Purchases of finished goods and other materials 8.7 11.9

Purchases of property, plant and equipment 0.2 3.0 Corporate Governance Rental expenses 2.1 1.8

Frigoglass, a company listed on the Athens Exchange, is a manufacturer of coolers, cooler parts, glass bottles, crowns and plastics. Frigoglass has a controlling interest in Frigoglass Industries Limited, a company in which the Group has a 23.9% effective interest, through its investment in Nigerian Bottling Company Ltd. Furthermore, during 2015 the Group acquired through its investment in Nigerian Bottling Company Ltd a 23.9% effective interest of Frigoglass West Africa Ltd, a company in which Frigoglass has a controlling interest. The Group entered into a supply agreement with Frigoglass for the purchase of cooling equipment in 1999. The supply agreement was extended in 2004, 2008 and, most recently, in 2013, on substantially similar terms. Coca-Cola HBC has the status of most favoured customer of Frigoglass, on a non-exclusive basis, provided that it obtains at least 60% (at prices which are negotiated on an annual basis and which must be competitive) of its annual requirements for cooling equipment from Frigoglass. The current agreement expires on 31

December 2018. Financial Statements As at 31 December 2017, Coca-Cola HBC owed €14.8m (2016: €32.0m) to and was owed €0.2m (2016: €1.0m) by Frigoglass. As at 31 December 2017, the Group owed €1.3m (2016: €2.6m) to AG Leventis (Nigeria) Plc. Capital commitments with Frigoglass and its subsidiaries at 31 December 2017 amounted to €21.9m (2016: €0.4m). c) Other related parties The below table summarises transactions with other related parties:

2017 2016 ​ € million € million Purchases 79.3 90.2 Swiss Statutory Reporting Other expenses 23.2 23.5

Beverage Partners Worldwide (‘BPW’) BPW is a 50/50 joint venture between The Coca-Cola Company and Nestlé. During 2017, the Group purchased inventory from BPW amounting to €77.9m (2016: €88.3m). As at 31 December 2017, Coca-Cola HBC owed €4.5m (2016: €5.4m) to and was owed €4.5m (2016: €14.9m) by BPW. Effective 1 January 2018, TCCC and Nestle have agreed to dissolve BPW.

Other During 2017, the Group purchased € nil (2016: €0.8m) of raw materials and finished goods and acquired €1.4m (2016: €1.1m) of property, Supplementary Information plant and equipment from other related parties. Furthermore, during 2017, the Group incurred expenses of €23.2m (2016: €23.5m) mainly related to maintenance services for cold drink equipment and installations of coolers, fountains, vending and merchandising equipment from other related parties. At 31 December 2017, the Group owed €0.4m (2016: €0.1m) to and was owed €0.8m including loans receivable of €nil (2016: €0.1m including loans receivable of €0.1m) by other related parties.

Coca-Cola HBC 2017 Integrated Annual Report 191 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

26. Related party transactions continued d) Joint ventures During 2017, the Group purchased €19.7m of finished goods (2016: €42.2m). In addition, during 2017 the Group recorded sales of finished goods and raw materials of €12.6m (2016: €12.3m) to joint ventures. Furthermore, the Group recorded other income of €1.4m (2016: €1.6m) from joint ventures. During 2017, the Group sold property, plant and equipment of € nil (2016: € 2.5m) to joint ventures. As at 31 December 2017, the Group owed €24.0m including loans payable of €4.3m (2016: €34.0m including loans payable €4.1m) to and was owed €8.6m including loans receivable of €3.6m (2016: €11.9m including loans receivable of €5.1m) by joint ventures. During 2017 the Group received dividends and capital returns of €19.3m (2016: €16.5m dividends) from Brewinvest S.A. Group of companies which are included in line ‘Net receipts from equity investments’ of the consolidated cash flow statement. e) Directors Anastassis G. David, Anastasios I. Leventis, Christo Leventis and Robert Ryan Rudolph have all been nominated by Kar-Tess Holding to the Board of Coca-Cola HBC. José Octavio Reyes and Ahmet C. Bozer have been nominated by TCCC to the Board of Coca-Cola HBC. There have been no transactions between Coca-Cola HBC and the Directors except for remuneration (refer to Note 8).

27. Share based payments

Accounting policies

Stock option and performance share compensation plans Coca-Cola HBC issues equity-settled share-based payments to its senior managers in the form of an employee stock option plan and a performance share plan. The employee stock option plan is measured at fair value at the date of grant. Fair value reflects the parameters of the compensation plan, the risk-free interest rate, the expected volatility, the dividend yield and the early exercise experience of the Group’s plans. Expected volatility is determined by calculating the historical volatility of Coca-Cola HBC’s share price over previous years. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. The performance share plan offers a specified number of performance share awards that vest three years after the grant. The fair value is determined at the grant date and reflects the parameters of the compensation plan, the dividend yield and the weighted average share price. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period. At the end of each reporting period the Group revises its estimates of the number of shares that are expected to vest based on non-market conditions, and recognises the impact of the revision to original estimates, if any, in the income statement with a corresponding adjustment to equity.

Employee Share Purchase Plan The Group operates an employee share purchase plan, the Employee Share Purchase Plan, an equity compensation plan in which eligible employees can participate. The Group makes contributions to the plan for participating employees and recognises expenses over the vesting period of the contributions.

The charge included in employee costs regarding share-based payments for the years ended 31 December is analysed as follows:

2017 2016 ​ € million € million Stock option awards 0.7 3.7 Performance shares awards 20.1 4.4 Employee Share Purchase Plan 4.6 4.6 Total share based payments charge 25.4 12.7

192 Coca-Cola HBC 2017 Integrated Annual Report Terms and conditions Strategic Report

Stock option plan: Senior managers are granted awards of stock options, based on performance, potentiality and level of responsibility. Options are granted at an exercise price equal to the closing price of the Company’s shares trading on the London Stock Exchange on the day of the grant. Options vest in one-third increments each year for three years and can be exercised for up to 10 years from the date of award. When the options are exercised, the proceeds received, net of any transaction costs, are credited to share capital (at the nominal value) and share premium.

Performance share plan: During 2015 the Group adopted a Performance share plan, under which senior managers are granted performance share awards, which have a three-year vesting period and are linked with Group specific key performance indicators. Performance share awards are granted at Corporate Governance a price equal to the closing price of the Company’s shares trading on the London Stock Exchange on the day of the grant.

Employee Share Purchase Plan: The Employee Share Purchase Plan is administered by a Plan Administrator. Under the terms of this plan, employees have the opportunity to invest 1% to 15% of their salary in ordinary Coca-Cola HBC shares by contributing to the plan monthly. Coca-Cola HBC will match up to a maximum of 3% of the employee’s salary by way of contribution. Employer contributions, in the form of a cash allocation, take place on a monthly basis and are used to purchase matching shares on the open market, which is the London Stock Exchange, at the time of vesting. Matching contributions vest one year after the grant. Dividends received in respect of shares under the Plan are used to purchase additional shares at the time of vesting. Shares are held under the Plan Administrator. In order to adapt the plan to the Greek legal framework Coca-Cola HBC matches the contribution of employees’ resident in Greece with an annual employer contribution, of up to 5%

of the employee’s salary in December of each year, which vest immediately. Financial Statements

Stock option activity The Group has not issued any new stock options in 2017 or 2016. The following table summarises information regarding outstanding stock options exercisable at 31 December 2017: Vesting Number of Exercise price Exercise price status as at stock options ​ (EUR) (GBP) 31 Dec 2017 End of period outstanding 2005 December Grant 13.19 11.24 fully vested 31.12.20201 245,001 2006 December Grant 16.37 13.95 fully vested 12.12.20211 397,500 2007 December Grant 26.41 22.51 fully vested 31.12.20221 537,250

2008 December Grant 9.02 7.69 fully vested 10.12.2018 539,500 Swiss Statutory Reporting 2009 December Grant 15.70 13.38 fully vested 09.12.2019 796,500 2010 December Grant 19.31 16.46 fully vested 08.12.2020 1,048,000 2011 March Grant 18.53 15.79 fully vested 15.03.2021 18,334 2011 December Grant 11.98 10.21 fully vested 15.12.2021 502,168 2013 June Grant – 15.00 fully vested 20.06.2023 587,500 2013 December Grant – 16.99 fully vested 09.12.2023 763,000 2014 December Grant – 13.33 fully vested 09.12.2024 928,904 Total ​ ​ ​ ​ 6,363,657

1. Relates to stock options granted under the previous stock option plans which expire in December 2020, 2021 and 2022 respectively. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 193 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

27. Share based payments continued A summary of stock option activity in 2017 under all plans is as follows: Number Weighted* Weighted of stock average average options exercise price exercise price ​ 2017 2017 (EUR) 2017 (GBP) Outstanding at 1 January 10,540,809 17.38 14.80 Exercised (4,122,401) 17.19 15.25 Expired (12,750) 25.37 22.51 Forfeited / Cancelled (42,001) 20.98 18.62 Outstanding at 31 December 6,363,657 16.29 14.46 Exercisable at 31 December 6,363,657 16.29 14.46

A summary of stock option activity in 2016 under all plans is as follows:

Number Weighted* Weighted of stock average average options exercise price exercise price ​ 2016 2016 (EUR) 2016 (GBP) Outstanding at 1 January 12,337,506 19.76 14.56 Exercised (1,499,341) 14.56 12.40 Expired (271,687) 20.29 17.28 Forfeited / Cancelled (25,669) 16.82 14.32 Outstanding at 31 December 10,540,809 17.38 14.80 Exercisable at 31 December 10,019,308 17.46 14.87

* For convenience purposes, the prices are translated with the closing exchange rate. Total proceeds from the issuance of the shares under the stock option plan in 2017 amounted to €71.0m (2016: €21.6m). The weighted average remaining contractual life of share options outstanding under the stock option compensation plans at 31 December 2017 was 4.0 years (2016: 4.8 years).

Performance shares activity A summary of performance shares activity is as follows:

Number of Number of performance performance shares shares ​ 2017 2016 Outstanding at 1 January 1,363,992 652,159 Granted 824,074 716,269 Forfeited / Cancelled (65,776) (4,436) Outstanding at 31 December 2,122,290 1,363,992

The 2017 expense recognised for performance shares awards includes the retrospective adjustment resulting from the reassessment of the performance conditions of the plan as well as the impact from the accelerated vesting of 396,402 shares, due to the passing of the former CEO. The weighted average remaining contractual life of performance shares outstanding under the performance share plans at 31 December 2017 was 1.6 years (2016: 2.2 years). The fair value of the 2017 performance share plan amounted to £18.70m (2016: £13.50m). Relevant inputs into the valuation are as follows:

​ 2017 2016 Weighted average share price £19.81 £14.34 Dividend yield 1.9% 2.0% Weighted average exercise period 3.0 years 3.0 years

194 Coca-Cola HBC 2017 Integrated Annual Report 28. Contingencies Strategic Report In relation to the Greek Competition Authority’s decision of 25 January 2002, one of Coca‑Cola Hellenic Bottling Company S.A.’s competitors has filed a lawsuit against Coca‑Cola Hellenic Bottling Company S.A. claiming damages in an amount of €7.7m. The court of first instance heard the case on 21 January 2009 and subsequently rejected the lawsuit. The plaintiff has appealed the judgement and on 9 December 2013 the Athens Court of Appeals rejected the plaintiff’s appeal. Following the spin-off, Coca‑Cola HBC Greece S.A.I.C. substituted Coca‑Cola Hellenic Bottling Company S.A. as defendant in this lawsuit. Coca‑Cola HBC Greece S.A.I.C. has not provided for any losses related to this case. The defendant has not filed for a cessation of the decision within the relevant deadline set by law, therefore the decision of the Athens Court of Appeal is final and irrecoverable and the case has closed. On 19 April 2014, the same plaintiff filed a new lawsuit against Coca‑Cola Hellenic Bottling Company S.A. (following the spin-off, Coca‑Cola HBC Greece S.A.I.C.) claiming payment of €7.5m as compensation for losses and moral damages for alleged anti-competitive commercial practices of Coca‑Cola Hellenic Bottling Company S.A. between 1994 and 2013. The two lawsuits partially overlap in the time period for which damages are sought by the plaintiff.

The hearing of the new lawsuit is now scheduled for 17 January 2019. Coca‑Cola HBC Greece S.A.I.C. has not provided for any losses Corporate Governance related to this case. On 6 September 2016, the Greek Competition Commission initiated an audit of Coca‑Cola HBC Greece S.A.I.C.’s operations as part of an investigation into certain commercial practices in the sparkling, juice and water categories. Coca‑Cola HBC Greece S.A.I.C. has a policy of strict compliance with Greek and EU competition law and it is co-operating fully with the Greek Competition Commission. In 1992, our subsidiary Nigerian Bottling Company (‘NBC’) acquired a manufacturing facility in Nigeria from Vacunak, a Nigerian company. In 1994, Vacunak filed a lawsuit against NBC, alleging that a representative of NBC had orally agreed to rescind the sale agreement and instead enter into a lease agreement with Vacunak. As part of its lawsuit Vacunak sought compensation for rent and loss of business opportunities. NBC discontinued all use of the facility in 1995. On 19 August 2013, NBC received the written judgement of the Nigerian court of first instance issued on 28 June 2012 providing for damages of approximately €19.3m. NBC has filed an appeal against the judgement. Based on advice from NBC’s outside legal counsel, we believe that it is unlikely that NBC will suffer material financial losses from this case. We have consequently not provided for any losses in relation to this case. Financial Statements The tax filings of the Group and its subsidiaries are routinely subjected to audit by tax authorities in most of the jurisdictions in which the Group conducts business. These audits may result in assessments of additional taxes. The Group provides additional tax in relation to the outcome of such tax assessments, to the extent that a liability is probable and estimable. The Group is also involved in various other legal proceedings. Management believes that any liability to the Group that may arise as a result of these pending legal proceedings will not have a material adverse effect on the results of operations, cash flows, or the financial position of the Group taken as a whole. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 195 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

29. Commitments

Accounting policy Leases of property, plant and equipment not classified as finance leases are classified as operating leases. Rentals paid under operating leases are charged to the income statement on a straight-line basis over the lease term. a) Operating leases The total of future minimum lease payments under non-cancellable operating leases at 31 December was as follows:

2017 2016 ​ € million € million Less than one year 39.1​ 33.3 Later than one year but less than five years 89.8​ 80.4 Later than five years 23.7​ 12.1 Future minimum lease payments 152.6​ 125.8

The total operating lease charges included within operating expenses for the years ended 31 December were as follows:

2017 €60.9m €86.0m

€37.1m €23.8m b) Capital commitments As at 31 December 2017, the Group had capital commitments amounting to €76.3m (2016: €84.9m). Of this, €0.6m related to the Group’s share of the commitments arising from joint operations (2016: €1.6m). The Group’s share of the commitments arising from joint ventures is disclosed in Note 15. c) Long-term commitments As at 31 December 2017 the Group had commitments to purchase raw materials and receive services amounting to €452.8m (2016: €510.6m). Of this, €nil related to the Group’s share of the commitments arising from joint operations (2016: €0.5m). The Group’s share of the commitments arising from joint ventures is disclosed in Note 15.

30. Post balance sheet events On 14 March 2018 the Remuneration Committee granted 665,676 performance share plan awards under the performance share plan, which have a three-year vesting period.

196 Coca-Cola HBC 2017 Integrated Annual Report Strategic Report Corporate Governance Financial Statements SWISS STATUTORY Swiss Statutory Reporting REPORTING Contents Supplementary Information

Swiss Statutory Reporting 198 Report of the statutory auditor on Coca‑Cola HBC AG’s consolidated financial statements 204 Report of the statutory auditor on Coca‑Cola HBC AG’s financial statements 207 Coca‑Cola HBC AG’s financial statements 218 Report of the statutory auditor on the Statutory Remuneration Report 219 Statutory Remuneration Report

Coca-Cola HBC 2017 Integrated Annual Report 197 SWISS STATUTORY REPORTING CONTINUED

Report of the statutory auditor to the General Meeting of Coca‑Cola HBC AG Steinhausen/Zug

Report on the audit of the consolidated financial statements

Opinion We have audited the consolidated financial statements of Coca-Cola HBC AG and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2017 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2017 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.

Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach Overview Overall Group materiality: € 28.2 million, which represents 5% of profit before tax. We conducted full scope audit work at subsidiary undertakings in 16 countries. Our audit scope addressed 87% of the Group’s consolidated net sales revenue and 88% of the Group’s assets. We also conducted specified audit procedures and analytical review procedures for other Group undertakings and functions.

Materiality As key audit matters, the following areas of focus, which are consistent with the prior year, have been identified: –– Goodwill and indefinite-lived intangible assets impairment assessment –– Uncertain tax positions Audit scope –– Provisions and contingent liabilities

ey audit matters

198 Coca-Cola HBC 2017 Integrated Annual Report Audit scope Strategic Report The Group operates through its trading subsidiary undertakings in 28 countries, as set out on page 142 of the 2017 Integrated Annual Report. The processing of the accounting entries for these entities is largely centralised in a shared services centre in Bulgaria, except for the subsidiary undertakings in Russia, Ukraine, Belarus and Armenia, which process their accounting entries locally. The Group also operates a centralised treasury function in the Netherlands and in Greece and a centralised procurement function in Austria. Mirroring the Group’s set-up, with the parent entity incorporated in Switzerland and the Group Finance Function located in Greece, we structured our audit as a referred reporting assurance engagement and involved PwC Athens as a Performing Firm, while performing specific procedures related to our role of Signing Firm of the audit report on the Consolidated Financial Statements prepared for Swiss statutory purposes. In close liaison with the performing firm, we designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular, we considered where subjective judgements were made; for example, in respect of Corporate Governance significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates. Financial Statements Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 199 SWISS STATUTORY REPORTING CONTINUED

Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. Overall Group materiality € 28.2 million How we determined it 5% of profit before tax Rationale for the materiality We chose profit before tax as the benchmark because, in our view, it is the benchmark against benchmark applied which the performance of the Group is most commonly measured, and it is a generally accepted benchmark

We agreed with the Audit Committee that we would report to them misstatements above €1.0 million identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

200 Coca-Cola HBC 2017 Integrated Annual Report Goodwill and indefinite-lived intangible assets impairment assessment Strategic Report Key audit matter How our audit addressed the key audit matter Refer to Note 13 for intangible assets including goodwill. We evaluated the appropriateness of management’s identification of Group’s CGUs and the process by which management prepared Goodwill and indefinite-lived intangible assets as at 31 December the CGUs value-in-use calculations which we found to be 2017 amount to €1,621.2 million and €199,9 million, respectively. satisfactory for the purposes of our audit. We tested the The above noted amounts have been allocated to individual mathematical accuracy of the CGUs value-in-use calculations and cash-generating units (‘CGUs’). The impairment assessment must compared them to the latest budget approved by the Directors and be performed at least annually and involves the determination of the assessed the quality of the budgeting process by comparing the recoverable amount, being the higher of the value-in-use and the prior year budget with actual data. fair value less costs to dispose. With the support of our valuation specialists, we challenged This area was a key matter for our audit due to the size of goodwill management’s analysis around the key drivers of cash flow Corporate Governance and indefinite-lived intangible assets and because the determination forecasts including selling price increases, short-term and long- of whether elements of goodwill and of indefinite-lived intangible term volume growth and the level of direct costs by comparing them assets are impaired involves complex and subjective estimates and with either the Group’s historical information or market data, as judgements by management about the future results of the CGUs. appropriate. We also evaluated the appropriateness of other key These estimates and judgements include assumptions surrounding assumptions including discount rates and foreign exchange rates revenue growth rates, direct costs, foreign exchange rates and by comparing them to relevant market data. We found the discount rates. assumptions to be consistent and in line with our expectations. Furthermore, macroeconomic volatility, competitor activity and We also performed sensitivity analyses on the key drivers of cash regulatory/fiscal developments can adversely affect each CGU and flow forecasts for the CGUs with significant balances of goodwill and potentially the carrying amount of goodwill and indefinite-lived indefinite-lived intangible assets as well as for CGUs which remain intangible assets. sensitive to changes in the key drivers, including the goodwill and Financial Statements franchise agreements held by the Nigeria CGU. No impairment charge was recorded in 2017. Goodwill and franchise agreements held by the Nigeria CGU have been determined by We assessed the appropriateness and completeness of the related management to remain sensitive to changes in the key drivers of disclosures in Note 13, and consider them to be reasonable. cash flow forecasts given the macroeconomic volatility in Nigeria. As a result of our work, we found that the determination by management that no impairment was required for goodwill and indefinite-lived intangible assets was supported by assumptions within reasonable ranges.

Uncertain tax positions Key audit matter How our audit addressed the key audit matter Swiss Statutory Reporting Refer to Note 10 for taxation and Note 28 for contingencies. We evaluated the related accounting policy for provisioning for tax exposures and found it to be appropriate. The Group operates in a complex multinational tax environment which gives rise to uncertain tax positions in relation to corporation In conjunction with our tax specialists, we evaluated management’s tax, transfer pricing and indirect taxes. As at 31 December 2017, the judgements in respect of estimates of tax exposures and Group has current tax liabilities of €97.5 million which include €69.2 contingencies in order to assess the adequacy of the Group’s tax million of provisions for tax uncertainties. provisions. In order to understand and evaluate management’s judgements, we considered the status of current tax authority The Group establishes provisions based on management’s audits and enquiries, the outcome of previous tax authority audits, judgements of the probable amount of the liability. Given the judgemental positions taken in tax returns and current year number of judgements involved in estimating the provisions relating estimates and recent developments in the tax environments in to uncertain tax positions and the complexities of dealing with tax which the Group operates. rules and regulations in numerous jurisdictions, this was considered Supplementary Information as a key audit matter. We challenged management’s key assumptions, in particular on cases where there had been significant developments with tax authorities, noting no significant deviation from our expectations. From the evidence obtained and in the context of the consolidated financial statements, taken as a whole, we consider the provisions in relation to uncertain tax positions as at 31 December 2017 to be appropriate.

Coca-Cola HBC 2017 Integrated Annual Report 201 SWISS STATUTORY REPORTING CONTINUED

Provisions and contingent liabilities Key audit matter How our audit addressed the key audit matter Refer to Note 20 for provisions and Note 28 for contingencies. We evaluated the design of and tested key controls in respect of litigation and regulatory procedures, which we found to be The Group faces a number of threatened and actual legal and satisfactory for the purposes of our audit. regulatory proceedings. The determination of the provision and/or the level of disclosure required involves a high degree of judgement Our procedures included the following: resulting in provisions and contingent liabilities being considered –– where relevant, reading external legal advice obtained by as a key audit matter. management; –– discussing open matters with the Group general counsel; –– meeting with local management and reading subsequent correspondence; –– assessing and challenging management’s conclusions through understanding precedents set in similar cases; and –– circularising relevant third-party legal representatives and follow up discussions, where appropriate, on certain material cases. On the basis of the work performed, whilst noting the inherent uncertainty with such legal and regulatory matters, we determined the relevant provisions as at 31 December 2017 to be appropriate. We assessed the appropriateness of the related disclosures in Note 28 and considered these to be reasonable.

Other information in the annual report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements and the remuneration report of Coca-Cola HBC AG and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

202 Coca-Cola HBC 2017 Integrated Annual Report Auditor’s responsibilities for the audit of the consolidated financial statements Strategic Report Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERTsuisse: http://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.

Report on other legal and regulatory requirements Corporate Governance In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers AG Financial Statements

Michael Foley Laura Bucur Audit expert Auditor in change

Lausanne, 16 March 2018 Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 203 SWISS STATUTORY REPORTING CONTINUED

Report of the statutory auditor to the General Meeting of Coca‑Cola HBC AG Steinhausen/Zug

Report on the audit of the financial statements

Opinion We have audited the financial statements of Coca-Cola HBC AG, which comprise the Balance Sheet as at 31 December 2017, Income Statement and Notes for the year then ended, including a summary of significant accounting policies. In our opinion, the financial statements (pages 207 to 217) as at 31 December 2017 comply with Swiss law and the Company’s articles of incorporation.

Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report. We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach Overview Overall materiality: CHF 42.6 million, which represents 0.5% of net assets. We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the entity, the accounting processes and controls, and the industry in which the entity operates.

Materiality As key audit matter, consistent with the prior year, the following area of focus has been identified: –– Valuation of investment in subsidiary

Audit scope

ey audit matters

Audit scope We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered where subjective judgements were made; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

204 Coca-Cola HBC 2017 Integrated Annual Report Materiality Strategic Report The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Overall materiality CHF 42.6 million

How we determined it 0.5% of net assets Corporate Governance Rationale for the materiality We chose net assets as the benchmark because, in our view, it is the benchmark which reflects the benchmark applied actual substance of the entity. This is a generally accepted benchmark for ultimate holding entities.

Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of investment in subsidiary Key audit matter How our audit addressed the key audit matter See Note 1 and 2.2 to the financial statements of the Company for We reperformed the market capitalisation comparison test Financial Statements the Directors’ disclosures of the related accounting policy and the performed by management detailed information on the valuation of the investment in subsidiary. In addition, we took comfort from the evidence obtained while The investment in subsidiary as at 31 December 2017 amounts reviewing management’s goodwill impairment analysis performed to CHF 8,501 million. for the purposes of the IFRS consolidated financial statements. The valuation of the investment in subsidiary is inherently a matter As a result of our work, we found management’s assumptions of judgement as it relies on forecasts of future profitability and cash and their determination that no impairment was required to be flows. Macroeconomic volatility, competitor activity and regulatory/ reasonable, after having reflected the reduction of the investment fiscal developments can adversely affect each underlying cash to reflect the dividend received from Coca Cola HBC Holdings B.V. – generating unit and potentially the carrying amount the of CHF 203.4 million.

total investments. Swiss Statutory Reporting The Company’s market capitalization is subject to share price volatility. Management test the carrying value of the Company’s investment annually by comparing the market capitalisation of the group with the carrying value of the investment.

Responsibilities of the Board of Directors for the financial statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Supplementary Information In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

Coca-Cola HBC 2017 Integrated Annual Report 205 SWISS STATUTORY REPORTING CONTINUED

Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse: http expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.

Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers AG

Michael Foley Laura Bucur Audit expert Auditor in change

Zürich, 16 March 2018

206 Coca-Cola HBC 2017 Integrated Annual Report Coca‑Cola HBC AG’s financial statements, Zug Strategic Report

Balance sheet ​ Note​ As at 31 December ​ ​ CHF thousands​ ​ ​ 2017​ 2016​ ​ ​ ​ ​ ASSETS ​ ​ ​ Cash and cash equivalents ​ 601 1,648 Short-term receivables from direct and indirect participations 2.1 37,673 7,354 Short-term receivables from third parties ​ 1,126 763

Prepaid expenses and accrued income ​ 37 – Corporate Governance Total current assets ​ 39,437 9,765 Investments in subsidiaries 2.2 8,501,197 8,704,582 Property, plant and equipment ​ 1,296 1,465 Total non-current assets ​ 8,502,493 8,706,047 Total assets ​ 8,541,930 8,715,812 ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ Trade payables due to third parties ​ 1,170 806 Short-term liabilities to direct and indirect participations 2.3 2,168 3,493 Short-term interest-bearing liabilities to direct and indirect participations 2.3 117 2,142 Financial Statements Accrued expenses 2.3 20,002 15,605 Total short-term liabilities ​ 23,457 22,046 Long-term interest-bearing liabilities to indirect participations 2.4 – 68,446 Provisions ​ 65 – Total long-term liabilities ​ 65 68,446 Share capital 2.5 2,484,112 2,456,492 Legal capital reserves ​ ​ ​ Reserves from capital contributions ​ 5,824,716 5,948,183 Reserves for treasury shares 2.6 85,298 85,298 Retained earnings ​ ​ ​

Results carried forward ​ 137,297 144,617 Swiss Statutory Reporting Loss for the year ​ (11,065) (7,320) Treasury shares 2.6 (1,950) (1,950) Total shareholders’ equity 2.7 8,518,408 8,625,320 Total liabilities and shareholders’ equity ​ 8,541,930 8,715,812 Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 207 SWISS STATUTORY REPORTING CONTINUED

Statement of income ​ ​Note Year ended 31 December ​ ​ CHF thousands​ ​ ​ 2017 2016 Dividend income ​ 203,385 160,395 Other operating income 2.8 34,420 25,333 Total operating income ​ 237,805 185,728 ​ ​ ​ ​ Employee costs ​ (27,463) (14,728) Other operating expenses ​ (15,719) (17,198) Write down of investments 2.2 (203,385) (160,395) Depreciation of property, plant and equipment ​ (197) (213) Total operating expenses ​ (246,764) (192,534) ​ ​ ​ ​ Operating loss ​ (8,959) (6,806) ​ ​ ​ ​ Finance income ​ – 3,568 Finance costs ​ (1,835) (3,790) ​ ​ ​ ​ Loss before tax ​ (10,794) (7,028) Direct taxes ​ (271) (292) ​ ​ ​ ​ Loss for the year ​ (11,065) (7,320)

208 Coca-Cola HBC 2017 Integrated Annual Report Notes to the financial statements of Coca‑Cola HBC AG, Zug Strategic Report

Introduction Coca‑Cola HBC AG (‘the Company’) was incorporated on 19 September 2012 by Kar-Tess Holding. On 11 October 2012, the Company announced a voluntary share exchange offer to acquire all outstanding ordinary registered shares and all American depositary shares of Coca‑Cola Hellenic Bottling Company S.A., Maroussi (GR) (‘CCHBC SA’). As a result of the successful completion of this offer, on 25 April 2013 the Company acquired 96.85% of the issued CCHBC SA shares, including shares represented by American depositary shares, and became the new parent company of the Group (the Company and its direct and indirect subsidiaries). On 17 June 2013, the Company completed its statutory buyout of the remaining shares of CCHBC SA that it did not acquire upon completion of its voluntary share exchange offer.

1. Accounting principles Corporate Governance

Accounting principles applied in the preparation of the financial statements These financial statements have been prepared in accordance with the provisions of commercial accounting as set out in the Swiss Code of Obligations (Art. 957 to 963b CO). Significant accounting and valuation principles are described below:

Dividend income Dividend income is recognised when the right to receive payment is established.

Other operating income

The Company provides management services to its principal subsidiaries and acts as guarantor to its principal subsidiary, Coca‑Cola HBC Financial Statements Finance B.V. The income from these services is recognised in the accounting period in which the service is provided.

Exchange rate differences The accounting records of the Company are retained in Euro and translated to Swiss francs (CHF) for presentation purposes. Except for investments in subsidiaries, property, plant and equipment, long-term liabilities and equity, which are translated at historical rates, all assets and liabilities denominated in foreign currencies are translated into CHF using the closing exchange rate as at 31 December 2017. Income and expenses are translated into CHF at the average exchange rate of the reporting year except for dividend income and related write down of investments (see note 2.2) which are valued at transaction date exchange rate. Net unrealised exchange losses are recorded in the income statement, while net unrealised gains are deferred within accrued liabilities. ​ Balance sheet as at ​ Income statement for the year ended Exchange rates 31 December 2017 31 December 2016 ​ 31 December 2017 31 December 2016 Swiss Statutory Reporting EUR 1.17 1.07 ​ 1.11 1.09 USD 0.99 1.03 ​ ​ ​ GBP 1.32 1.26 ​ ​ ​

Investments in subsidiaries Investments in subsidiaries are valued at historical cost and evaluated for impairment if identified triggering events occur.

Property, plant and equipment Depreciation is calculated on the basis of the following useful lives and in accordance with the following methods: Property, plant and equipment Useful life Method Supplementary Information Leasehold improvement (building) 20 years 5% linear Leasehold improvement (office infrastructure) 10 years 10% linear Building infrastructure 12 years 8.33% linear Furniture and fixtures, office equipment and other tangible fixed assets 8 years 12.5% linear Telephony infrastructure 7 years 14.29% linear Communication equipment, computers and PCs 4 years 25% linear Tablets 3 years 33.33% linear

Treasury shares Treasury shares are recognised at acquisition cost and deducted from shareholders’ equity at the time of acquisition. If treasury shares are sold, the gain or loss arising is recognised in the income statement as finance income or finance cost as appropriate.

Coca-Cola HBC 2017 Integrated Annual Report 209 SWISS STATUTORY REPORTING CONTINUED

2. Information relating to the balance sheet and statement of income

2.1. Short-term receivables from direct and indirect participations The short-term receivables from direct and indirect participations do not bear interest. ​ As at 31 December ​ CHF thousands​ Name of participation 2017 2016 Coca-Cola HBC Schweiz AG, Brüttisellen 14 – CCB Management Services GmbH, Vienna 16,076 6,631 Coca‑Cola HBC Finance B.V., Amsterdam 21,583 703 LLC Coca‑Cola Eurasia, Nizhni Novgorod – 15 Coca‑Cola HBC Business Services Organisation, Sofia – 5 Short-term receivables from direct and indirect participations 37,673 7,354

2.2. Investments in subsidiaries ​ ​ ​ As at 31 December ​ ​ ​ CHF thousands​ Direct subsidiary Share of capital Share of votes 2017 2016 Coca‑Cola HBC Holdings B.V., Amsterdam1 100% 100% 8,704,582 8,864,977 Write down of investment ​ ​ (203,385) (160,395) Investments in subsidiaries 100% 100% 8,501,197 8,704,582

1. Coca‑Cola HBC Holdings B.V., Amsterdam was incorporated on 26 June 2013. In 2015 the Company adopted a practice to reduce the value of its investment in Coca‑Cola HBC Holdings B.V. by an amount equal to the dividend received from that subsidiary. The amount of the write down in 2017 is equal to the dividend received in July 2017 from Coca‑Cola HBC Holdings B.V. of CHF203,385 thousand. The principal direct and indirect participations of the Company are disclosed in Note 15 to the consolidated financial statements.

2.3. Short-term liabilities to direct and indirect participations and accrued expenses The short-term liabilities to the direct and indirect participations do not bear interest except for the liability to Coca‑Cola HBC Finance B.V. which is interest bearing. ​ As at 31 December ​ CHF thousands​ Name of participation 2017 2016 CCB Management Services GmbH, Vienna 1,865 2,820 Coca‑Cola Hellenic Business Service Organisation, Sofia 50 4 Coca-Cola HBC Srbija d.o.o., Belgrade 146 – Coca‑Cola HBC Finance B.V. Amsterdam 89 647 Coca‑Cola HBC Services, Athens – 17 Coca‑Cola HBC Northern Ireland Ltd., Lisburn 18 5 Total short-term non interest-bearing liabilities to direct and indirect participations 2,168 3,493

​ ​ Name of participation 2017 2016 Coca‑Cola HBC Finance B.V., Amsterdam 117 2,142 Total short-term interest-bearing liabilities to direct and indirect participations 117 2,142

​ ​ Accrued expenses​ 2017 2016 Direct taxes 359 313 Employee related costs (Management incentive plan and vesting of Performance Shares) 15,963 2,848 Employee related costs (social security & insurance, payroll taxes) 1,734 1,149 Other accrued expenses 1,205 2,360 Net unrealised gains from foreign currency translation 741 8,935 Total accrued expenses 20,002 15,605

210 Coca-Cola HBC 2017 Integrated Annual Report Employee related costs (Management incentive plan and vesting of Performance Shares) as at 31 December 2017 includes an accrual Strategic Report of CHF 12,2 million due to the accelerated vesting of the former CEO’s Performance Share Plan of estimated net 374,152 shares at GBP 24.64 per share.

2.4. Long-term interest-bearing liabilities to indirect participations ​ As at 31 December ​ CHF thousands​ ​ 2017 2016 Coca‑Cola HBC Finance B.V., Amsterdam – 68,446

Long-term interest-bearing liabilities comprise loans from Coca-Cola HBC Finance B.V. On 13 August 2015 the Company entered into

interest bearing long-term loan agreements with Coca-Cola Finance B.V. with a nominal amount of EUR 66,000 thousand and maturing on Corporate Governance 31 December 2019. The loan was fully repaid on 28 December 2017.

2.5. Share capital ​ Number of shares Nominal value Total ​ ​ CHF CHF thousands Share capital as at 1 January 2016 368,141,297 6.70 2,466,547 Cancellation of shares 1 (3,000,000) 6.70 (20,100) Shares issued to employees exercising stock options 1,499,341 6.70 10,045 Share capital as at 31 December 2016 366,640,638 6.70 2,456,492

​ Number of shares Nominal value Total

​ ​ CHF CHF thousands Financial Statements Share capital as at 1 January 2017 366,640,638 6.70 2,456,492 Shares issued to employees exercising stock options 4,122,401 6.70 27,620 Share capital as at 31 December 2017 370,763,039 6.70 2,484,112

2.6. Treasury shares The number of treasury shares held by Coca‑Cola HBC AG and its subsidiaries qualifying under article 659b SCO and their movements are as follows: Acquisition cost Treasury shares (held by subsidiaries) Number of shares per share Total ​ ​ CHF CHF thousands Total treasury shares at 31 December 2016 3,430,135 24.8673 85,298 Swiss Statutory Reporting ​ ​ ​ ​ Total treasury shares at 31 December 2017 3,430,135 24.8673 85,298

Acquisition cost Treasury shares held by the Company Number of shares per share Total ​ ​ CHF CHF thousands Treasury shares held by the Company as at 1 January 2016 3,014,925 21.8404 (65,847) Cancellation of shares1 (3,000,000) 21.2990 63,897 Treasury shares held by Coca‑Cola HBC AG as at 31 December 2016 14,925 130.6600 (1,950) Treasury shares held by Coca‑Cola HBC AG as at 31 December 2017 14,925 130.6600 (1,950)

1. On 23 June 2015, the Annual General Meeting adopted a proposal to buy-back of up to 3,000,000 ordinary shares. The programme started on 17 August 2015 and Supplementary Information was completed on 21 December 2015. The Company purchased 3,000,000 of its ordinary shares of CHF 6.70 each at an average price of GBP 1,407.53 per share (minimum price of GBP 1,284.67 and maximum price of GBP 1,548.45). On 21 June 2016, the Annual General Meeting approved the proposal to reduce the share capital of Coca‑Cola HBC AG by cancelling the 3,000,000 treasury shares acquired as part of the share buy-back programme described above. The respective reduction of the share capital was completed in September 2016.

Coca-Cola HBC 2017 Integrated Annual Report 211 SWISS STATUTORY REPORTING CONTINUED

2. Information relating to the balance sheet and statement of income continued

2.7. Equity ​ Share capital Legal capital reserves ​ Retained earnings Treasury shares Total Reserves from capital Reserves for ​ ​ contributions treasury shares1 ​ ​ ​ ​ ​ CHF thousands Balance as at 1 January 2016 2,466,547 6,137,760 85,298 ​ 144,617 (65,847) 8,768,375 Shares issued to employees exercising stock options 10,045 13,462 – ​ – – 23,507 Dividends – (159,242) – ​ – – (159,242) Cancellation of shares (20,100) (43,797) – ​ – 63,897 – Loss for the year – – – ​ (7,320) – (7,320) Balance as at 31 December 2016 2,456,492 5,948,183 85,298 ​ 137,297 (1,950) 8,625,320 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as at 1 January 2017 2,456,492 5,948,183 85,298 ​ 137,297 (1,950) 8,625,320 Shares issued to employees exercising stock options 27,620 53,368 – ​ – – 80,988 Dividends2 – (176,835) – ​ – – (176,835) Loss for the year – – – ​ (11,065) – (11,065) Balance as at 31 December 2017 2,484,112 5,824,716 85,298 ​ 126,232 (1,950) 8,518,408

1. Represents the book value of treasury shares held by subsidiaries. 2. On 21 June 2017 the shareholders of the Company at the Annual General Meeting approved the distribution of a €0.44 dividend per each ordinary registered share. The dividend was paid on 25 July 2017 and amounted to CHF 176,835 thousand.

2.8. Other operating income ​ 2017 2016 ​ CHF thousands Management fees 31,763 22,383 Guarantee fee 2,657 2,950 Total other operating income 34,420 25,333

Management fees relate to service income earned from services provided to the Company‘s direct and indirect participations. Guarantee fee is the income the Company receives for the services provided as guarantor to Coca‑Cola HBC Finance B.V.

212 Coca-Cola HBC 2017 Integrated Annual Report 3. Other information Strategic Report

3.1. Net release of hidden reserves No hidden reserves were released for the years ended 31 December 2017 or 31 December 2016.

3.2. Number of employees In 2017 and 2016 on an annual average basis, the number of full-time equivalent employees did not exceed 50.

3.3. Operating lease liabilities (not terminable or expiring within 12 months of balance sheet date) ​ Residual term (years) ​ 2017 2016 ​ ​ ​ CHF thousands Office rental, Turmstrasse 26, Zug 1 to 5 year ​ – 500 Corporate Governance Total lease liabilities ​ ​ – 500

3.4. Contingent liabilities

Euro medium-term note programmes In June 2013 the Group established a new €3.0bn Euro medium-term note programme (the ‘EMTN Programme’). The EMTN Programme was updated in September 2014 and then again in September 2015. Notes are issued under the EMTN Programme through the Company’s wholly owned subsidiary, Coca-Cola HBC Finance B.V., a private limited liability company established under the laws of the Netherlands, and are guaranteed by the Company.

On 18 June 2013 Coca-Cola HBC Finance B.V. issued €800m 2.375% notes due 18 June 2020 under the EMTN Programme, which are Financial Statements guaranteed by the Company. On 10 March 2016 Coca-Cola HBC Finance B.V. issued €600m 1.875% notes due 11 November 2024 under the EMTN Programme, which are guaranteed by the Company. As at 31 December 2017, a total of €1.4bn in notes issued under the EMTN Programme were outstanding. The EMTN Programme has not been updated since September 2015 so further issues under the EMTN Programme are currently not possible pending a further update.

Syndicated multi-currency revolving credit facility In June 2015, a new syndicated multi-currency revolving credit facility agreement was signed for €500m. Coca‑Cola HBC Finance B.V. Swiss Statutory Reporting is the original borrower, ING Bank N.V., London Branch the facility agent and the Company and Coca‑Cola HBC Holdings B.V are the two guarantors.

Commercial paper programme In October 2013 the Group established a new €1.0bn Euro commercial paper programme (the ‘CP Programme’). The CP Programme was updated in September 2014 and then again in May 2017. Notes are issued under the CP Programme by Coca-Cola HBC Finance B.V. and guaranteed by the Company. The outstanding amount under the CP Programme was €120m as at 31 December 2017 (2016: €108.5m).

Credit support provider On 18 July 2013 the Company signed as credit support provider to Deutsche Bank AG, J.P. Morgan Securities plc, Credit Suisse International, Credit Suisse AG, ING Bank N.V., Societe Generale, Merrill Lynch International and to The Royal Bank of Scotland plc in favour Supplementary Information of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreements.1 On 24 July 2013 the Company signed as credit support provider to the Governor and Company of the Bank of Ireland, in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 On 8 August 2013 the Company signed as credit support provider to Citibank N.A. in favour of CCHBC Bulgaria AD for the obligations as defined in the ISDA Master Agreement.1 On 8 August 2013 the Company signed as credit support provider to Citibank N.A. in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 On 24 June 2014 the Company signed as credit support provider to Intesa Sanpaolo S.pA. in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1

Coca-Cola HBC 2017 Integrated Annual Report 213 SWISS STATUTORY REPORTING CONTINUED

3.4. Contingent liabilities continued On 5 October 2015 the Company signed as credit support provider to Macquarie Bank International Limited in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 On 22 June 2016 the Company signed as credit support provider to UniCredit Bank AG in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 On 31 August 2016 the Company signed as credit support provider to BNP Paribas in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 On 1 November 2017 the Company signed as credit support provider to Goldman Sachs Global International in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 On 22 December 2017 the Company signed as credit support provider to Citigroup Global Markets Limited in favour of Coca-Cola HBC Finance B.V. for the obligations as defined in the ISDA Master Agreement.1 1. The ISDA (International Swap Dealers Association) Master Agreement is a standardised form issued by the International Swap Dealers Association Inc. to be used for credit support transactions.

3.5. Significant shareholders As at 31 December 2017 and 2016, there were two shareholders exceeding the threshold of 5% voting rights in the Company’s share capital. Percentage of Percentage of issued share outstanding share ​ Date Number of shares capital1 capital2 Total Kar-Tess Holding 31.12.2016 85,355,019 23.3% 23.5% Total Kar-Tess Holding 31.12.2017 85,355,019 23.0% 23.2% Total shareholdings related to The Coca‑Cola Company 31.12.2016 85,112,078 23.2% 23.4% Total shareholdings related to The Coca‑Cola Company 31.12.2017 85,112,078 23.0% 23.2%

1. Basis: total issued share capital including treasury shares. Share basis 370,763,039 as at 31 December 2017 (2016: 366,640,638). 2. Basis: total issued share capital excluding treasury shares. Share basis 367,317,979 as at 31 December 2017 (2016: 363,195,578).

3.6. Shareholdings, conversion and option rights The table below sets out a comparison of the interests in the Company’s total issued share capital that the members of the Board of Directors (‘Directors’) and Operating Committee hold (all of which, unless otherwise stated, are beneficial interests or are interests of a person connected with a Director or a member of the Operating Committee) and the interests in the Company’s share capital.

​ 31 December 2017 ​ 31 December 2016 Percentage of Percentage of Percentage of Percentage of issued share outstanding issued share outstanding ​ Number of shares capital1 share capital2 ​ Number of shares capital1 share capital2 Directors ​ ​ ​ ​ ​ ​ ​ Anastassis G. David3 – – – ​ – – – Dimitris Lois 57,379 0.02% 0.02% ​ 49,142 0.01% 0.01% Zoran Bogdanovic10 19,869 0.01% 0.01% ​ 16,817 0.00% 0.00% Ahmet C. Bozer – – – ​ – – – Olusola (Sola) David-Borha – – – ​ – – – William W. (Bill) Douglas III 10,000 0.00% 0.00% ​ 10,000 0.00% 0.00% Charlotte J. Boyle4 – – – ​ – – – Antonio D’Amato5 – – – ​ – – – Reto Francioni – – – ​ – – – Anastasios I. Leventis6 – – – ​ – – – Christo Leventis7 – – – ​ – – – José Octavio Reyes – – – ​ – – – Alexandra Papalexopoulou – – – ​ – – – Robert Ryan Rudolph – – – ​ – – – John P. Sechi – – – ​ – – –

214 Coca-Cola HBC 2017 Integrated Annual Report ​ 31 December 2017 ​ 31 December 2016 Strategic Report Percentage of Percentage of Percentage of Percentage of issued share outstanding share issued share outstanding share ​ Number of shares capital1 capital2 ​ Number of shares capital1 capital2 Operating Committee ​ ​ ​ ​ ​ ​ ​ Alain Brouhard 17,304 0.00% 0.00% ​ 14,534 0.00% 0.00% Jan Gustavsson 56,633 0.02% 0.02% ​ 53,027 0.01% 0.01% Keith Sanders 28,555 0.01% 0.01% ​ 27,125 0.01% 0.01% Martin Marcel 9,171 0.00% 0.00% ​ 5,824 0.00% 0.00% Michalis Imellos 16,650 0.00% 0.00% ​ 14,649 0.00% 0.00% Naya Kalogeraki 1,755 0.00% 0.00% ​ 355 0.00% 0.00% Sanda Parezanovic 2,236 0.00% 0.00% ​ 1,477 0.00% 0.00% Corporate Governance Sotiris Yannopoulos 12,385 0.00% 0.00% ​ 10,377 0.00% 0.00%

The following table sets out information regarding the stock options and performance shares held by members of the Operating Committee as at 31 December 2017: ​ Stock options (‘ESOP’) ​ Performance shares (‘PSP’) Unvested and subject to Number of Already Vesting at the Granted in performance ​ stock options vested end of 2018 ​ 2017 conditions Vested Dimitris Lois8, 9 – – – ​ 128,421 426,773 – Alain Brouhard 320,000 320,000 – ​ 24,214 81,275 –

Jan Gustavsson 726,000 726,000 – ​ 27,211 91,190 – Financial Statements Keith Sanders 499,000 499,000 – ​ 26,552 88,945 – Martin Marcel 178,000 178,000 – ​ 23,255 76,571 – Michalis Imellos 286,500 286,500 – ​ 30,148 100,755 – Naya Kalogeraki 45,000 45,000 – ​ 20,378 43,189 – Sanda Parezanovic 48,500 48,500 – ​ 20,858 62,646 – Sotiris Yannopoulos 150,500 150,500 – ​ 23,675 78,144 – Zoran Bogdanovic 236,750 236,750 – ​ 25,473 84,841 –

1. Basis: total issued share capital including treasury shares. Share basis 370,763,039 as at 31 December 2017 (2016: 366,640,638). 2. Basis: total issued share capital excluding treasury shares. Share basis 367,317,979 as at 31 December 2017 (2016: 363,195,578). 3. Anastassis David is a beneficiary of: (a) a private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Truad Swiss Statutory Reporting Verwaltungs AG is the Trustee, whereby he has an indirect interest with respect to the 85,355,019 shares held by Kar-Tess Holding S.A. (b) a further private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Selene Treuhand AG is the Trustee, whereby he has an indirect interest with respect to 823,008 shares held by Selene Treuhand AG. 4. Charlotte J. Boyle was appointed to the Board of Directors, the Remuneration Committee and the Nomination Committee on 20 June 2017. 5. Antonio D’ Amato retired from the Board of Directors, the Remuneration Committee and the Nomination Committee on 20 June 2017. 6. Anastasios I. Leventis is a beneficiary of: (a) a private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Truad Verwaltungs AG is the Trustee, whereby he has an indirect interest with respect to the 85,355,019 shares held by Kar- Tess Holding S.A. (b) a further private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Selene Treuhand AG is the Trustee, whereby he has an indirect interest with respect to 386,879 shares held by Selene Treuhand AG. (c) a further private discretionary trust for the primary benefit of present and future members of the family of the late Christodoulos Papaneokleus Leventis, of which Mervail Company (PTC) Limited is the Trustee, whereby he has an indirect interest with respect to 623,664 shares held by Carlcan Holding Limited. 7. Christo Leventis is a beneficiary of: (a) a private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Truad Verwaltungs AG is the Trustee, whereby he has an indirect interest with respect to the 85,355,019 shares held by Kar- Tess Holding S.A. (b) a further private discretionary trust for the primary benefit of present and future members of the family of the late Anastasios George Leventis, of which Selene Supplementary Information Treuhand AG is the Trustee, whereby he has an indirect interest with respect to 498,545 shares held by Selene Treuhand AG. (c) a further private discretionary trust for the primary benefit of present and future members of the family of the late Christodoulos Papaneokleus Leventis, of which Mervail Company (PTC) Limited is the trustee, whereby he has an indirect interest with respect to 757,307 shares held by Carlcan Holding Limited. 8. Dimitris Lois’ heirs exercised 1,700,000 options under ESOP between 2 October and 31 December 2017. 9. Following the passing of Dimitris Lois, the Remuneration Committee determined at its meeting in March 2018 that, in line with the terms of the PSP, PSP awards granted to Dimitris Lois in 2015, 2016 and 2017 should vest pro-rated for time and performance up to 2 October 2017. PSP awards therefore vested over in aggregate 396,402 shares. The remainder of the shares subject to PSP awards granted to Dimitris Lois lapsed. The Remuneration Committee further determined that these awards should vest immediately to Dimitris Lois’ heirs. 10. Zoran Bogdanovic will be formerly appointed to the Board of Directors at the next AGM in June 2018.

Coca-Cola HBC 2017 Integrated Annual Report 215 SWISS STATUTORY REPORTING CONTINUED

3.7. Fees paid to the auditor The audit and other fees paid to the auditor are disclosed in Note 8 of the consolidated financial statements.

3.8. Conditional capital On 25 April 2013, the shareholders’ meeting agreed to the creation of conditional capital in the maximum amount of CHF 245,601 thousand, through issuance of a maximum of 36,657 thousand fully paid-in registered shares with a par value of CHF 6.70 each upon exercise of options issued to members of the Board of Directors, members of the management, employees or advisers of the Company, its subsidiaries and other affiliated companies. The share capital of CHF 2,484,112 thousand as disclosed in the balance sheet differs from the share capital in the commercial register of CHF 2,456,492 thousand as per 31 December 2017 due to the exercise of management options in the course of full year 2017. Book value per Total CHF Conditional capital Number of shares share CHF thousand Agreed conditional capital as per shareholders’ meeting on 25 April 2013 36,656,843 6.70 245,601 Shares issued to employees exercising stock options until 31 December 2015 (1,650,152) 6.70 (11,056) Shares issued to employees exercising stock options in 2016 (1,499,341) 6.70 (10,046) Remaining conditional capital as at 31 December 2016 33,507,350 6.70 224,499 Shares issued to employees exercising stock options in 2017 (4,122,401) 6.70 (27,620) Remaining conditional capital as at 31 December 2017 29,384,949 6.70 196,879

216 Coca-Cola HBC 2017 Integrated Annual Report Proposed appropriation of available earnings and reserves / declaration of dividend Strategic Report

1. Proposed appropriation of available earnings Available earnings and reserves CHF thousands Balance brought forward from previous years 137,297 Net loss for the year (11,065) Total available retained earnings to be carried forward 126,232 ​ ​ Reserves from capital contributions before distribution 5,824,716 Total available retained earnings and reserves 5,950,948 Corporate Governance 2. Proposed declaration of a dividend from reserves The Board of Directors proposes to declare a gross dividend of EUR 0.54 on each ordinary registered share with a par value of CHF 6.70 from the general capital contribution reserve. Own shares held directly by the Company are not entitled to dividends. The total aggregate amount of the dividends shall be capped at an amount of CHF 300,000 thousand (the ‘Cap’), and thus will reduce the general capital contribution reserve of CHF 5,824,716 thousand, as shown in the financial statements as of 31 December 2017, by a maximum of CHF 300,000 thousand. To the extent that the dividend calculated on EUR 0.54 per share would exceed the Cap on the day of the Annual General Meeting, due to the exchange rate determined by the Board of Directors in its reasonable opinion, the Euro per share amount of the dividend shall be reduced on a pro-rata basis so that the aggregate amount of all dividends paid does not exceed the Cap. Payment of the dividend shall be made at such time and with such record date as shall be determined by the Annual General Meeting and the Board of Directors. Financial Statements 3. Proposed appropriation of reserves/declaration of dividend

Variant 1: Dividend of EUR 0.54 at current exchange ratio As of 31 December 2017 CHF thousands Reserves from capital contributions before distribution 5,824,716 Proposed dividend of EUR 0.541 (236,241) Reserves from capital contributions after distribution 5,588,475

1. Illustrative at an exchange rate of CHF 1.18 per EUR. Assumes that the shares entitled to a dividend amount to 370,748,114.

Variant 2: Dividend if Cap is triggered

As of 31 December 2017 CHF thousands Swiss Statutory Reporting Reserves from capital contributions before distribution 5,824,716 (Maximum) dividend if Cap is triggered2 (300,000) (Minimum) Reserves from capital contributions after distribution 5,524,716

2. Dividend is capped at a total aggregate amount of CHF 300,000 thousand. Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 217 SWISS STATUTORY REPORTING CONTINUED

Report of the statutory auditor to the General Meeting Coca‑Cola HBC AG Steinhausen/Zug

Report of the statutory auditor on the statutory remuneration report We have audited the accompanying remuneration report of Coca-Cola HBC AG for the year ended 31 December 2017. The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) on pages 220 to 222 of the remuneration report.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the remunera-tion report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s responsibility Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuner-ation report complies with Swiss law and articles 14–16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remu-neration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the remuneration report of Coca-Cola HBC AG for the year ended 31 December 2017 complies with Swiss law and articles 14–16 of the Ordinance. PricewaterhouseCoopers SA

Michael Foley Laura Bucur Audit expert Auditor in change

Lausanne, 16 March 2018

218 Coca-Cola HBC 2017 Integrated Annual Report Statutory Remuneration Report Strategic Report

Additional disclosures regarding the Statutory Remuneration Report The section below is in line with the Ordinance against excessive pay in stock exchange listed companies, which requires disclosure of the elements of compensation paid to the Company’s Board of Directors and the Operating Committee. The numbers relate to the calendar years of 2017 and 2016. In the information presented below, the exchange rate used for conversion of 2017 remuneration data from Euro to CHF is 1/1.1202 and the exchange rate used for conversion of 2016 remuneration data from Euro to CHF is 1/1.0903. As the Company is headquartered in Switzerland, it is required for statutory purposes to present compensation data for two consecutive years, 2016 and 2017. The applicable methodology used to calculate the value of stock option and performance shares follows Swiss standards. In 2017 and 2016, the fair value of performance shares from the 2017 and 2016 grants is calculated based on the performance share awards that are expected to vest, and not the stock options that vested in 2017 and 2016 respectively. Below is the relevant information for Swiss statutory purposes. Corporate Governance

Compensation for acting members of governing bodies The Company‘s Directors believe that the level of remuneration offered to Directors and the members of the Operating Committee should reflect their experience and responsibility as determined by, among other factors, a comparison with similar multinational companies and should be sufficient to attract and retain high-calibre Directors who will lead the Group successfully. In line with the Group‘s commitment to maximise shareholder value, its policy is to link a significant proportion of remuneration for its Operating Committee to the performance of the business through short and long-term incentives. Therefore, the Operating Committee members’ financial interests are closely aligned with those of the Company’s shareholders through the equity-related long-term compensation plan. The total remuneration of the Directors and members of the Operating Committee of the Company, including performance share grants, during 2017 amounted to CHF 22.5 million. Out of this, the amount relating to the expected value of performance share awards granted in Financial Statements relation to 2017 was CHF 7.3 million. Pension and post-employment benefits for Directors and the Operating Committee of the Company during 2017 amounted to CHF 0.8 million.​ Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 219 SWISS STATUTORY REPORTING CONTINUED

Compensation of the Board of Directors ​ 2017 CHF Cash and Cash Pension and Total fair value of non-cash performance post-employment stock options at Total ​ Fees benefits1 incentives benefits the date granted compensation Anastassis G. David 78,411 – – – – 78,411 Ahmet C. Bozer 78,411 – – – – 78,411 Olusola (Sola) David-Borha2 101,285 – – – – 101,285 William W. (Bill) Douglas III 109,216 – – – – 109,216 Antonio D’Amato 3 45,366 – – – – 45,366 Charlotte J. Boyle4 45,366 -​ -​ -​ -​ 45,366 Reto Francioni5 122,678 – – – – 122,678 Anastasios I. Leventis 90,733 – – – – 90,733 Christo Leventis6 80,790 – – – – 80,790 José Octavio Reyes7 89,693 – – – – 89,693 Alexandra Papalexopoulou 103,055 – – – – 103,055 Robert Ryan Rudolph8 84,605 – – – – 84,605 John P. Sechi 93,869 – – – – 93,869 Dimitris Lois9 – – – – – – Total Board of Directors 1,123,478 – – – – 1,123,478

1. Allowances consist of cost of living allowance, housing support, Employee Share Purchase Plan, private medical insurance relocation expenses, home trip allowance, lump sum expenses and similar allowances. 2. For Olusola (Sola) David-Borha, on top of her fees of CHF 93,869, the Group paid CHF 7,416 in social security contributions as required by Swiss legislation. 3. Antonio D’ Amato retired from the Board of Directors, the Remuneration Committee and the Nomination Committee on 20 June 2017. The Group has applied a half-year period base fee of CHF 45,366. 4. Charlotte J. Boyle was appointed to the Board of Directors, the Remuneration Committee and the Nomination Committee on 20 June 2017. The Group has applied a half-year period base fee of CHF 45,366. 5. For Reto Francioni, on top of his fees of CHF 113,696, the Group paid CHF 8,982 in social security contributions as required by Swiss legislation. 6. In June 2017 social security contributions of CHF 2,379, withheld in December 2016, were returned to Christo Leventis, on top of his fees of CHF 78,411, as he was deemed not subject to Swiss social security. 7. For José Octavio Reyes, on top of his fees of CHF 84,572, the Group paid CHF 5,121 in social security contributions as required by Swiss legislation. 8. For Robert Ryan Rudolph, on top of his fees of CHF 78,411, the Group paid CHF 6,194 in social security contributions as required by Swiss legislation. 9. Dimitris Lois’ compensation was based on his role as CEO, member of the Operating Committee Team, and his employment agreement. Dimitris Lois was not entitled and did not receive additional compensation as a Director. Non-Executive Directors do not participate in any of the Group’s incentive plans, nor do they receive any retirement benefits.

220 Coca-Cola HBC 2017 Integrated Annual Report Compensation of the Board of Directors Strategic Report ​ 2016 CHF Cash and Cash Pension and Total fair value of non-cash performance post-employment stock options at the Total ​ Fees benefits1 incentives benefits date granted compensation Anastassis G. David 73,490 – – – – 73,490 Ahmet C. Bozer2 37,555 – – – – 37,555 George A. David3 – – – – – – Olusola (Sola) David-Borha4 94,712 – – – – 94,712 William W. (Bill) Douglas III5 52,310 – – – – 52,310 Irial Finan6 35,935 – – – – 35,935 Antonio D’Amato 84,920 – – – – 84,920 Corporate Governance Reto Francioni7 58,738 – – – – 58,738 Sir Michael Llewellyn-Smith8 52,522 – – – – 52,522 Nigel Macdonald9 49,757 – – – – 49,757 Anastasios I. Leventis10 43,457 – – – – 43,457 Christo Leventis11 40,509 – – – – 40,509 José Octavio Reyes12 85,435 – – – – 85,435 Alexandra Papalexopoulou13 90,822 – – – – 90,822 Robert Ryan Rudolph14 40,509 – – – – 40,509 John P. Sechi15 87,805 – – – – 87,805 Dimitris Lois16 – – – – – –

Total Board of Directors 928,476 – – – – 928,476 Financial Statements

1. Allowances consist of cost of living allowance, housing support, Employee Share Purchase Plan, private medical insurance, relocation expenses, home trip allowance, lump sum expenses and similar allowances. 2. Ahmet C. Bozer was appointed to the Board on 21 June 2016. The Group has applied a half-year period base fee of CHF 37,555. 3. George A. David retired from the Board and the Social Responsibility Committee on 21 June 2016. For the first half of 2016, George A. David waived any fee in respect to his membership on the Board of Directors or any Board Committee. 4. For Olusola (Sola) David Borha, on top of the base fee of CHF 73,490 and Audit and Risk Committee membership fee of CHF 14,315, the Group paid CHF 6,907 in social security contributions as required by Swiss legislation. 5. William W. (Bill) Douglas III was appointed to the Board and the Audit and Risk Committee on 21 June 2016. The Group has applied a half-year period base fee of CHF 37,555 and CHF 14,755 for the Audit and Risk Committee. 6. Irial Finan retired from the Board on 21 June 2016. The Group has applied a half-year period base fee of CHF 35,935. 7. Reto Francioni was appointed to the Board, the Remuneration Committee and the Nomination Committee on 21 June 2016. For Reto Francioni on top of the fees of CHF 54,455 the Group paid CHF 4,283 in social security contributions as required by Swiss legislation. The Group has applied a half-year period base fee of CHF 37,555, CHF 5,902 for the Nomination Committee, CHF 2,951 for the Remuneration Committee and CHF 8,047 for Senior Independent Director fee. 8. Sir Michael Llewellyn-Smith retired from the Board, the Remuneration Committee, the Nomination Committee and the Social Responsibility Committee on 21 June Swiss Statutory Reporting 2016. For the first half of 2016, Sir Michael Llewellyn-Smith waived his membership fee on the Social Responsibility Committee. The Group has applied a half-year period fee of CHF 5,529 for the Nomination Committee Chairmanship, CHF 5,529 for the Remuneration Committee Chairmanship, CHF 5,529 for the Senior Independent Director fee and a CHF 35,935 base fee. 9. Nigel Macdonald retired from the Board and the Audit and Risk Committee on 21 June 2016. The Group has applied a half-year period fee of CHF 13,822 for the Audit and Risk Committee Chairmanship and a CHF 35,935 base fee. 10. For Anastasios I. Leventis, the Group has applied a half-year period base fee of CHF 37,555 and CHF 5,902 for the Social Responsibility Committee Chairmanship. For the first half of 2016, Anastasios I. Leventis waived any fee in respect to his membership on the Board of Directors or any Board Committee. 11. For Christo Leventis, on top of the base fee of CHF 37,555, the Group paid CHF 2,954 in social security contributions as required by Swiss legislation. The Group has applied a half-year period base fee of CHF 40,509. For the first half of 2016, Christo Leventis waived any fee in respect to his membership on the Board of Directors or any Board Committee. 12. For José Octavio Reyes, on top of the base fee of CHF 73,490 and Social Responsibility Committee membership fee of CHF 5,715, the Group paid a social security contribution of CHF 6,230 as required by Swiss legislation. 13. For Alexandra Papalexopoulou on top of the full year base fees of CHF 73,490 and CHF 5,715 for the Nomination Committee, the Group has applied a half-year period fee of CHF 2,951 for the Social Responsibility Committee as required by Swiss legislation, a half year period membership fee of CHF 2,764 as member of the Remuneration Committee and a half‑year period fee of CHF 5,902 as Chair of the Remuneration Committee. 14. Robert Ryan Rudolph was appointed to the Board on 21 June 2016. For Robert Ryan Rudolph, on top of the base half-year fee of CHF 37,555, the Group paid, as Supplementary Information required by Swiss legislation, a social security contribution of CHF 2,954. 15. For John P. Sechi the Group has applied a full year period fee of CHF 14,315 for the Audit and Risk Committee membership and a CHF 73,490 base fee. 16. Dimitris Lois’ compensation was based on his role as CEO and member of the Operating Committee, according to his employment contract. Dimitris Lois was not entitled to and did not receive additional compensation as a Director. Non-Executive Directors do not participate in any of the Group’s incentive plans, nor do they receive any retirement benefits.

Coca-Cola HBC 2017 Integrated Annual Report 221 SWISS STATUTORY REPORTING CONTINUED

Compensation of the Operating Committee The total remuneration paid to or accrued for the Operating Committee for 2017 amounted to CHF 22.5 million. ​ 2017 CHF Total fair value of Cash and Cash Pension and performance non-cash performance post-employment shares at the Total ​ Base salary benefits1 incentives2 benefits3 date granted4 compensation Dimitris Lois5, 6, Chief Executive Officer (highest compensated member of the Operating Committee) 954,005 603,522 724,976 132,354 2,217,695 4,632,552 Zoran Bogdanovic7, Chief Executive Officer 65,347 40,651 0 6,498 48,876 161,372 Other members 4,194,756 5,066,461 2,719,887 699,118 5,057,260 17,737,482 Total Operating Committee 5,214,108 5,710,634 3,444,863 837,970 7,323,831 22,531,406

1. Cash and non-cash benefits consist of cost of living allowance, housing support, schooling, Employee Share Purchase Plan, private medical insurance, relocation expenses, home trip allowance, employer social security contributions, lump sum expenses and similar allowances. 2. The cash performance incentives represent the monetary value that was paid under MIP in 2017 reflecting the 2016 business performance, inclusive of the value that was paid under LTIP in 2017 reflecting the 2014-2016 business performance for Naya Kalogeraki, Marcel Martin and Sanda Parezanovic. 3. Members of the Operating Committee participate in the pension plan of their employing entity, as appropriate. 4. Values under long-term incentives represent the fair value of performance shares that are expected to vest for the 2017 grant in order to comply with Swiss reporting guidelines. 5. Dimitris Lois’ compensation was based on his role as CEO, member of the Operating Committee Team, and his employment agreement. Dimitris Lois was not entitled to and did not receive the fixed compensation applicable for non-Executive Directors of the Board of Directors. 6. Dimitris Lois’ compensation reflects the period 1 January to 2 October 2017 and includes 2 months’ payment made to the heirs as per Swiss law. Total fair value of performance shares at the date granted has been prorated for the period 1 January to 2 October 2017. 7. Zoran Bogdanovic’s compensation as CEO reflects the period 7 December to 31 December 2017. His compensation for the period 1 January to 6 December 2017 is included under “Other Members”. Total fair value of performance shares at the date granted has been prorated for the period 7 December to 31 December 2017. The total remuneration paid to or accrued for the Operating Committee for 2016 amounted to CHF 26.6 million.

​ 2016 CHF Cash and Cash Pension and Total fair value of non-cash performance post-employment stock options at the ​ Base salary benefits1 incentives2 benefits3 date granted4 Total compensation Dimitris Lois, Chief Executive Officer (highest compensated member of the Operating Committee)5 979,959 605,006 934,732 171,448 2,191,279 4,882,424 Other members6,7 4,541,369 8,872,660 3,551,429 706,926 4,064,975 21,737,359 Total Operating Committee 5,521,328 9,477,666 4,486,161 878,374 6,256,254 26,619,783

1. Allowances consist of cost of living allowance, housing, support, schooling, Employee Share Purchase Plan, private medical insurance, relocation expenses, employer social security contributions, lump sum expenses and similar allowances. 2. The bonus represents the monetary value that was paid under MIP in 2016 reflecting the 2015 business performance. 3. Members of the Operating Committee participate in the pension plan of their employing entity, as appropriate. 4. Values under long-term incentives represent the fair value of performance shares that are expected to vest for the 2016 grant in order to comply with Swiss reporting guidelines. 5. Dimitris Lois’ compensation is based on his role as CEO and member of the Operating Committee, according to his employment contract. Dimitris Lois is not entitled to and does not receive the fixed compensation applicable for non-Executive Directors of the Board of Directors. 6. John Brady left the Group on 31 December 2016. 7. Naya Kalogeraki was appointed to the role of Group Commercial Director on 1 July 2016.

Credits and loans granted to governing bodies In 2017, there were no credits or loans granted to active or former members of the Company’s Board of Directors, members of the Operating Committee or to any related persons. There are no outstanding credits or loans.

222 Coca-Cola HBC 2017 Integrated Annual Report ALTERNATIVE PERFORMANCE MEASURES

The Group uses certain Alternative Performance Measures (APMs) in making financial, operating and planning decisions as well as in Strategic Report evaluating and reporting its performance. These APMs provide additional insights and understanding to the Group’s underlying operating and financial performance, financial condition and cash flow. The APMs should be read in conjunction with and do not replace by any means the directly reconcilable IFRS line items.

Definitions and reconciliations of Alternative Performance Measures (APMs)

1. Comparable APMs1 In discussing the performance of the Group, “comparable” measures are used, which are calculated by deducting from the directly reconcilable IFRS measures the impact of the Group’s restructuring costs, the mark-to-market valuation of the commodity hedging activity and certain other tax items, which are collectively considered as items impacting comparability, due to their nature. More specifically the following items are considered as items that impact comparability: Corporate Governance 1. Restructuring costs Restructuring costs comprise costs arising from significant changes in the way the Group conducts business, such as significant supply chain infrastructure changes, outsourcing of activities and centralisation of processes. These costs are included within the income statement line ‘Operating expenses’. However, they are excluded from the comparable results in order for the user to obtain a better understanding of the Group’s operating and financial performance achieved from underlying activity. 2. Commodity hedging The Group has entered into certain commodity derivative transactions in order to hedge its exposure to commodity price risk. Although these transactions are economic hedging activities that aim to manage our exposure to sugar, aluminium and gasoil price volatility, they do not qualify for hedge accounting. In addition, the Group recognises certain derivatives embedded within commodity purchase contracts that have been accounted for as stand-alone derivatives and do not qualify for hedge accounting. The fair value gains and losses on the derivatives and embedded derivatives are immediately recognised in the income statement in the cost of goods sold and Financial Statements operating expenses line items. The Group’s comparable results exclude the gains or losses resulting from the mark-to-market valuation of these derivatives and embedded derivatives. These gains or losses are reflected in the comparable results in the year when the underlying transactions occur, to match the profit or loss to that of the corresponding underlying transactions. We believe this adjustment provides useful information related to the impact of our economic risk management activities. 3. Other tax items Other tax items represent the tax impact of changes in income tax rates affecting the opening balance of deferred tax arising during the year, included in the Tax line item of the income statement. These are excluded from comparable after-tax results in order for the user to obtain a better understanding of the Group’s underlying financial performance. 1. Comparable APMs refer to comparable cost of goods sold, comparable gross profit, comparable operating expenses, comparable EBIT, comparable EBIT margin, comparable Adjusted EBITDA, comparable tax, comparable net profit and comparable EPS.

The Group discloses comparable performance measures to enable users to focus on the underlying performance of the business on a Swiss Statutory Reporting basis which is common to both years for which these measures are presented. The reconciliation of comparable measures to the directly related measures calculated in accordance with IFRS is as follows:

Reconciliation of comparable financial indicators (numbers in € million except per share data) 2017 Cost of Operating Adjusted goods sold Gross profit expenses EBIT EBITDA Tax Net profit1 EPS (€) As reported (4,083) 2,439 (1,849) 590 928 (138) 426 1.168 Restructuring costs – – 29 29 20 (7) 22 0.061 Commodity hedging 3 3 (1) 2 2 (1) 1 0.004 Other tax items – – – – – – – – Supplementary Information Comparable (4,080) 2,443 (1,822) 621 949 (146) 450 1.233

2016 Cost of Operating Adjusted goods sold Gross profit expenses EBIT EBITDA Tax Net profit1 EPS (€) As reported (3,920) 2,299 (1,793) 506 846 (114) 344 0.949 Restructuring costs – – 38 38 20 (8) 30 0.082 Commodity hedging (25) (25) (2) (27) (27) 8 (19) (0.052) Other tax items – – – – – (2) (2) (0.007) Comparable (3,945) 2,274 (1,757) 518 839 (117) 352 0.972

Figures are rounded. 1. Net profit and comparable net profit refer to net profit and comparable net profit respectively after tax attributable to owners of the parent. Coca-Cola HBC 2017 Integrated Annual Report 223 ALTERNATIVE PERFORMANCE MEASURES CONTINUED

Reconciliation of Comparable EBIT per reportable segment (numbers in € million) ​ 2017 ​ Established Developing Emerging Consolidated EBIT 238 92 260 590 Restructuring costs 13 2 14 29 Commodity hedging (1) (1) 4 2 Comparable EBIT 250 92 278 621

​ 2016 ​ Established Developing Emerging Consolidated EBIT 237 93 177 506 Restructuring costs 9 6 22 38 Commodity hedging (4) (2) (21) (27) Comparable EBIT 242 97 178 518

Figures are rounded.

2. FX-neutral APMs A business like ours, operating in 28 countries and with many different currencies, is bound to be affected by foreign exchange movements, and we report our financial results to reflect this. However, we manage the business against targets which are set to be comparable between years and within them, for otherwise foreign currency movements would undermine our ability to drive the business forward and control it. Through this Report, as in previous years, we will highlight comparable results and foreign-exchange-neutral results as well as the audited results which reflect the actual foreign currency effects experienced. It is through the relentless focus on managing by using comparable figures that we have succeeded in delivering significantly improved performance, although we recognise that in the shorter term currency movements may distort the underlying trends. The Group therefore also evaluates its operating and financial performance on an FX-neutral basis (i.e. without giving effect to the impact of variation of foreign currency exchange rates from year to year). FX-neutral APMs are calculated by adjusting prior year amounts for the impact of exchange rates applicable to the current year. FX-neutral measures enable users to focus on the performance of the business on a basis which is not affected by changes in foreign currency exchange rates applicable to the Group’s operating activities from year to year. The most common FX-neutral measures used by the Group are: 1. FX-neutral net sales revenue and FX-neutral net sales revenue per unit case FX-neutral net sales revenue and FX-neutral net sales revenue per unit case are calculated by adjusting prior-year net sales revenue for the impact of changes in exchange rates applicable in the current year. 2. FX-neutral comparable input costs per unit case FX-neutral comparable input costs per unit case is calculated by adjusting prior-year commodity costs and more specifically, sugar, resin, aluminium and fuel commodity costs, excluding commodity hedging as described above; and other raw materials costs for the impact of changes in exchange rates applicable in the current year. The calculations of the FX-neutral APMs and the reconciliation to the most directly related measures calculated in accordance with IFRS are as follows:

Reconciliation of FX-neutral net sales revenue per unit case (numbers in € million unless otherwise stated) ​ 2017 ​ Established Developing Emerging Consolidated Net sales revenue 2,436 1,173 2,912 6,522 Currency impact – – – – FX-neutral net sales revenue 2,436 1,173 2,912 6,522 Volume (m unit cases) 613 394 1,097 2,104 FX-neutral net sales revenue per unit case (€) 3.97 2.98 2.66 3.10

​ 2016 ​ Established Developing Emerging Consolidated Net sales revenue 2,408 1,094 2,717 6,219 Currency impact (15) 18 (64) (62) FX-neutral net sales revenue 2,392 1,112 2,653 6,157 Volume (m unit cases) 607 383 1,068 2,058 FX-neutral net sales revenue per unit case (€) 3.94 2.90 2.48 2.99

Figures are rounded. 224 Coca-Cola HBC 2017 Integrated Annual Report 3. Other APMs Strategic Report

Adjusted EBITDA Adjusted EBITDA is calculated by adding back to operating profit the depreciation and impairment of property, plant and equipment, the amortisation and impairment of intangible assets, the employee share option and performance share costs and items, if any, reported in the line ‘Other non-cash items’ of the consolidated cash flow statement. Adjusted EBITDA is intended to provide useful information to analyse the Group’s operating performance excluding the impact of operating non-cash items as defined above. It is also intended to measure the level of financial leverage of the Group by comparing Adjusted EBITDA to Net debt. Adjusted EBITDA is not a measure of profitability and liquidity under IFRS and has limitations, some of which are as follows: Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised will often have to be replaced in the future, and Adjusted EBITDA does not Corporate Governance reflect any cash requirements for such replacements. Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us and should be used only as a supplementary APM.

Free cash flow Free cash flow is an APM used by the Group and defined as cash generated by operating activities after payments for purchases of property, plant and equipment net of proceeds from sales of property, plant and equipment and including principal repayments of finance lease obligations. Free cash flow is intended to measure the cash generation from the Group’s business, based on operating activities, including the efficient use of working capital and taking into account its net payments for purchases of property, plant and equipment. The Group considers the purchase and disposal of property, plant and equipment as ultimately non-discretionary since ongoing investment in plant, machinery, technology and marketing equipment, including coolers, is required to support the day-to-day operations and the CCHBC Group’s growth prospects. The Group presents free cash flow because it believes the measure assists users of the Financial Statements financial statements in understanding the Group’s cash-generating performance as well as availability for interest payment, dividend distribution and own retention. The free cash flow measure is used by management for its own planning and reporting purposes since it provides information on operating cash flows, working capital changes and net capital expenditure that local managers are most directly able to influence. Free cash flow is not a measure of cash generation under IFRS and has limitations, some of which are as follows: free cash flow does not represent the Group’s residual cash flow available for discretionary expenditures since the Group has debt payment obligations that are not deducted from the measure; free cash flow does not deduct cash flows used by the Group in other investing and financing activities; and free cash flow does not deduct certain items settled in cash. Furthermore, other companies in the industry in which the Group operates may calculate free cash flow differently, limiting its usefulness as a comparative measure. Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 225 ALTERNATIVE PERFORMANCE MEASURES CONTINUED

Capital expenditure The Group uses capital expenditure as an APM to ensure that its cash spending is in line with its overall strategy for the use of cash. Capital expenditure is defined as payments for purchases of property, plant and equipment plus principal repayments of finance lease obligations less proceeds from sale of property, plant and equipment. The following table illustrates how Adjusted EBITDA, free cash flow and capital expenditure are calculated:

2017 2016 ​ € million € million Operating profit (EBIT) 590 506 Depreciation and impairment of property, plant and equipment 317 332 Employee share options and performance shares 21 8 Other non-cash items included in operating income – (1) Adjusted EBITDA 927 846 Gains on disposal of non-current assets (4) (3) Decrease in working capital 9 12 Tax paid (128) (92) Net cash from operating activities 804 763 ​ ​ ​ Payments for purchases of property, plant and equipment (410) (348) Principal repayments of finance lease obligations (7) (20) Proceeds from sale of property, plant and equipment 39 36 Capital expenditure (378) (332) ​ ​ ​ Net cash from operating activities 804 763 Capital expenditure (378) (332) Free cash flow 426 431

Figures are rounded.

Net debt Net debt is an APM used by management to evaluate the Group’s capital structure and leverage. Net debt is defined as current borrowings plus non-current borrowings less cash and cash equivalents and time deposits classified as other financial assets, as illustrated below:

​ As at 31 December 2017 2016 ​ € million € million Current borrowings 166 157 Non-current borrowings 1,460 1,468 Other financial assets – time deposits (151) – Cash and cash equivalents (724) (573) Net debt 752 1,051

Figures are rounded.

226 Coca-Cola HBC 2017 Integrated Annual Report ASSURANCE STATEMENT

Independent Assurance Statement on the 2017 Integrated Annual Report Strategic Report

To the management and stakeholders of Coca-Cola Hellenic Bottling Company AG: denkstatt GmbH was commissioned by Coca-Cola Hellenic Bottling Company AG (hereinafter referred to as “the Company”) to provide independent third-party assurance, in accordance with the AA1000 Assurance Standard (AA1000AS) for the printed and downloadable pdf versions of the Company’s 2017 Integrated Annual Report (hereinafter referred to as “the Report”). We have reviewed all sustainability‑related content and data included in the Report. Financial data were not reviewed as part of this process. The assurance engagement covered the nature and extent of the Company’s incorporation of the principles of inclusivity, materiality and responsiveness for stakeholder dialogue contained in the AA1000 Series. The application level of the Global Reporting Initiative (GRI Standards) has been verified.

denkstatt is an independent professional services company. Our team of experts has extensive professional experience of assurance Corporate Governance engagements related to non-financial information and sustainability management, meaning it is qualified to conduct this independent assurance engagement. denkstatt has implemented a certified quality and environmental management system which complies with the requirements of ISO 9001 and ISO 14001, and accordingly maintains a comprehensive quality control system.

Management responsibilities The Company’s management is responsible for preparing the Report, statements within it and related website content. Management is also responsible for identifying stakeholders and material issues, defining commitments with respect to sustainability performance, and establishing and maintaining appropriate performance management and internal control systems from which reported information is derived. The Company’s management is also responsible for establishing data collection and internal control systems to ensure reliable reporting, specifying acceptable reporting criteria and selecting data to be collected for the purposes of the Report. Management responsibilities Financial Statements also extend to preparing the Report in accordance with the GRI Standards.

Assurance provider’s responsibilities Our responsibilities are to: –– express our conclusions and make recommendations on the nature and extent of the Company’s adherence to the AA1000 Accountability Principles Standard (APS); –– express our conclusions on the reliability of the information in the Report, and whether it is in accordance with the criteria in the GRI Standards. During 2017 we did not perform any tasks or services for the Company or other clients which would lead to a conflict of interest, nor were we responsible for the preparation of any part of the Report. Swiss Statutory Reporting

Scope, standards and criteria used We have fulfilled our responsibilities to provide appropriate assurance that the information in the Report is free of material misstatements. We planned and carried out our work based on the GRI Standards and the AA1000 Series. We used the criteria in AA1000APS to perform a Type 2 engagement and to provide high assurance regarding the nature and extent of the Company’s adherence to the principles of inclusivity, materiality and responsiveness.

Methodology, approach, limitations and scope of work We planned and carried out our work in order to obtain all the evidence, information and explanations that we considered necessary in relation to the above responsibilities. Our work included the following procedures, which involved a range of evidence-gathering activities. Supplementary Information –– Gathering information and conducting interviews with members of the Executive Management, staff from the Sustainability Department, the Human Resources Department, the Procurement Department, the Product Quality and Safety Department and the Public Affairs and Communication Department, as well as various Group-level functional managers, regarding the Company’s adherence to the principles of inclusivity, materiality, sustainability context, completeness and responsiveness as required by GRI and AA1000. This includes the commitment of the Company’s management to these principles, the existence of systems and procedures to support adherence to these principles, and the embedding of the principles at country level. The key topics of the interviews conducted at Group level were: the materiality process, employee wellbeing and engagement, corporate governance, business ethics and anti-corruption, sustainable sourcing, responsible marketing, packaging, recycling and recovery, climate, carbon and water, as well as health and nutrition.

Coca-Cola HBC 2017 Integrated Annual Report 227 ASSURANCE STATEMENT CONTINUED

–– Conducting further interviews at national headquarters in Belarus, Croatia, Cyprus, Italy, Nigeria, Romania and Russia in order to guarantee the completeness of the information required for the audit. –– Site visits to nine bottling plants, with a focus on developing markets: –– Established markets: Kykkos (Cyprus), Marcianise (Italy) –– Developing markets: Zagreb (Croatia) –– Emerging markets: Vlanpak (Belarus), Ikeja, Owerri (both Nigeria), Ploiesti (Romania), Davydovskoe and Yekatarinburg (both Russia) –– Making enquiries and conducting spot checks to assess implementation of the Company’s policies (at plant, country and corporate level). –– Making enquiries and conducting spot checks with regard to documentation required to assess current data collection systems and procedures in place to ensure reliable and consistent reporting from the plants to the corporate level. –– Conducting additional interviews with six representatives of the following external stakeholder groups: customers, academia, non‑governmental organisations and employee representatives. The interviews were conducted during the Joint Annual Stakeholder Forum of the Company and The Coca-Cola Company in Vienna. –– Verifying all three inventory scopes (scopes 1, 2 and 3) as defined by the GHG Protocol, including progress against emission reduction targets, reported changes in emissions compared with base years (2004 and 2010) and emissions intensity figures for 2017. –– Verifying the GRI content index, which was published separately to the Report, to ensure consistency with the requirements of the GRI Standards (comprehensive). The scope of the assurance covered all of the information relevant to sustainability in the Report and focused on Company systems and activities during the reporting period. The following chapters were not covered in the sustainability assurance process: –– Financial Statements, Supplementary Information, and Swiss Statutory Reporting.

Conclusions On the basis of our work, we found nothing to suggest that the information in the Integrated Annual Report 2017 is inaccurate or contains material misstatements. Any errors or misstatements identified during the engagement were corrected prior to the Report being published.

Positive developments –– As a member of the Union of European Soft Drinks Associations (UNESDA), CCHBC has developed a clear commitment regarding health and nutrition in EU countries and Switzerland to reduce sugar in sparkling soft drinks by 10% between 2015 and 2020. A sugar reduction of 5% was achieved in 2017 by realigning the portfolio in favour of sugar-free variants and re-formulations with lower sugar content. –– CCHBC is signatory of the Task Force on Climate-related Financial Disclosures, which develops voluntary, consistent climate-related financial risk disclosures for use by companies to provide information to investors, lenders, insurers and other stakeholders. –– CCHBC has made excellent progress in all environmental dimensions covering energy, carbon, water, packaging and waste. In addition, the internal carbon and water pricing system as well as top 10 support efficiency projects for water deserve to be mentioned. The documentation of environmental data is highly sophisticated in most operations. –– Diversity and inclusion: CCHBC has developed a new Inclusion and Diversity Policy to ensure that diversity, which is essential to the Company, is properly implemented in the Group. For the Company, diversity and inclusion means being able to serve customers as effectively as possible. CCHBC strives to ensure that no one is treated inappropriately or disrespectfully in the workplace, which is why diversity and inclusion are also defined as core leadership values. –– Sustainable sourcing: a third-party assessment tool was introduced in 2017 to evaluate CCHBC suppliers’ performance in terms of corporate social responsibility. More than 120 critical suppliers have already been assessed using the tool. In addition, CCHBC piloted three sustainability day events with strategic suppliers. These events provided an opportunity to share information about corporate social responsibility policies and sustainability commitments, as well as achievements and best practice. Moreover they are seen as a starting point for collaboration on shared targets and joint initiatives. –– Risk management: CCHBC has set up an excellent risk management system which incorporates sustainability-related aspects. Risk assessment is conducted on a quarterly basis and covers topics such as environmental protection, obesity, strikes, labour unrest and supplier continuity. –– Remuneration: sustainability-related topics are considered important aspects in the incentive system, which represents an exceptional approach.

228 Coca-Cola HBC 2017 Integrated Annual Report Findings and conclusions regarding adherence to the AA1000 principles of inclusivity, materiality, responsiveness, Strategic Report and specific performance-related information.

Inclusivity –– Group level: the Company has implemented a comprehensive and efficient stakeholder engagement process at Group level. Its cornerstones are the annual internal and external stakeholder survey and the Annual Stakeholder Forum (held in Vienna in 2017). –– Country and plant level: various stakeholder management tools are used at country and plant level (e.g. Sparkle). The tools in place provide an overview of relevant stakeholders and evaluate them based on factors such as influence and attitude. As a result, optimised communication and engagement strategies can be implemented for each stakeholder group.

Materiality –– Group level: an advanced process is in place for defining material topics. The materiality assessment process considers stakeholders’ Corporate Governance expectations on the relevant sustainability-related topics. The materiality assessment also forms the basis for preparing a GRI‑compliant report. –– Country and plant level: in most organisations there is strong awareness of current and upcoming material sustainability-related topics. However, most locations have not yet implemented a formal process for defining material topics. With an increasing number of GRI-compliant sustainability reports at country level, more systematic approaches will need to be established. We recommend promoting the implementation of materiality assessments at country level and incorporating the plants as well.

Responsiveness –– Country level: effective plans for stakeholder engagement are developed at country level. However, these plans place an emphasis on the stakeholder groups with the greatest influence on the Company, and thus focus on the likes of public authorities and customers. In order to ensure that no stakeholder groups are ignored, a more holistic approach is recommended. By including a wider range Financial Statements of stakeholders in communication, new sustainability-related topics can be addressed. –– A variety of excellent community projects have been implemented at both country and plant level. There are especially good examples of communication with consumers regarding the use of natural and artificial sweeteners. –– Excellent examples of sustainability reporting (e.g. Belarus) and socio-economic impact assessments (e.g. Croatia and Italy) were found in the course of the audit. The Group should highlight these examples of good practice and encourage further enhancement of reporting in line with sustainability standards.

Additional conclusions and recommendations –– Reporting: the internal reporting process needs to be strengthened in terms of relevant sustainability-related topics, particularly in the following cases: –– Training hours: currently the documentation of training hours is being transferred from two systems to a single new platform. Swiss Statutory Reporting Steps must be taken to ensure that all training hours are captured in this platform. This can be done by means of training for representatives and by ensuring that all functional training hours are recorded on the new platform. In addition, a clear process for documenting external training courses has to be implemented. –– Community investment: complete transparency in terms of performance indicators (participant numbers, volunteer numbers, plant visits, cash or in-kind contributions) needs to be ensured. The documentation of figures has to be streamlined. Moreover, action is needed to ensure that all plant-based community investments are covered in the reporting. –– Sustainable sourcing: full implementation of the Environmental, Social and Governance Pre-assessment Tool (a key tool for screening suppliers, launched in 2016) is required, combined with further training on proper use of the tool in procurement processes. –– Packaging recycling and recovery: the 2020 Commitments are an important development in this area. However, the documentation, verification process and methodology used to calculate country-specific figures could be improved and described in a packaging recycling Supplementary Information and recovery guidance document. In addition, new commitments should be developed based on TCCC’s World Without Waste vision. –– Responsible marketing: responsible marketing activities should be further strengthened in specific UNESDA KPIs, such as making a full range of beverages available in schools and using unbranded vending machines.

Vienna, 6 March, 2018 denkstatt GmbH Consultancy for Sustainable Development Willibald Kaltenbrunner Lead Auditor Managing Partner, denkstatt Coca-Cola HBC 2017 Integrated Annual Report 229 SHAREHOLDER INFORMATION

We take great pride in being regarded as a transparent and Share price performance accessible Company in all our communications with investment LSE: CCH 2017 2016 2015 communities around the world. We engage with key financial In £ per share ​ ​ ​ audiences, including institutional investors, sell-side analysts Close 24.20 17.70 14.48 and financial journalists, as well as our Company’s shareholders. High 26.71 18.40 16.29 The investor relations department manages the interaction Low 17.69 12.65 10.57 with these audiences by attending ad hoc meetings and investor Market capitalisation (£ million) 8,862 6,426 5,237 conferences throughout the year, in addition to the regular meetings and presentations held at the time of our ATHEX: EEE 2017 2016 2015 results announcements. In € per share ​ ​ ​ Close 27.25 20.69 19.79 Analysis of Geographic High 29.80 20.99 23.16 shareholding sizes concentration Low 20.47 16.00 13.88 Market capitalisation (€ million) 9,979 7,512 7,158

Share capital In 2017, the share capital of Coca‑Cola HBC increased by the issue of 4,122,401 new ordinary shares following the exercise of stock options pursuant to the Group’s employee stock option plan. Total proceeds from the issuance of the shares under the stock option plan amounted to €71.0 million. Following the above changes, and including 3,445,060 ordinary shares held as treasury shares, on 31 December 2017 the share 1 10,000: 1 UK: 29 capital of the Group amounted to €2,015.1 million and comprised 10,001 100,000: 13 Continental Europe: 33 370,763,039 shares with a nominal value of CHF 6.70 each. 100,001 1,000,00: 40 United States: 28 1,000,001 over: 45 Rest of the world: 3 Treasury shares: 2 Retail investors: 6 Major shareholders The principal shareholders of the Group are Kar-Tess Holding (a Luxembourg company), which holds approximately 23%, and Listings The Coca‑Cola Company, which indirectly holds approximately Coca‑Cola HBC AG (LSE: CCH) was admitted to the premium 23% of the Group’s issued share capital. listing segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange’s main market for listed Dividends securities on 29 April 2013. With effect from 29 April 2013, For 2017, the Board of Directors has proposed a €0.54 dividend per Coca‑Cola HBC AG’s shares are also admitted on the Athens share in line with the Group’s progressive dividend policy. Exchange (ATHEX: EEE). Coca Cola HBC AG has been included This compares to a dividend payment of €0.44 per share in 2016. as a constituent of the FTSE 100 and FTSE All-Share Indices from For more information on our dividend policy and dividend history, 20 September 2013. please visit our website at www.coca‑colahellenic.com. London Stock Exchange Ticker symbol: CCH Financial calendar ISIN: CH019 825 1305 9 May 2018 First quarter trading update SEDOL: B9895B7 11 June 2018 Annual General Meeting Reuters: CCH.L 9 August 2018 Half-year financial results Bloomberg: CCH LN 8 November 2018 Third quarter trading update Athens Exchange Ticker symbol: EEE Corporate website ISIN: CH019 825 1305 Reuters: EEEr.AT www.coca‑colahellenic.com Bloomberg: EEE GA Shareholder and analyst information Credit rating Standard & Poor’s: L/T BBB+, S/T A2, positive outlook Shareholders and financial analysts can obtain further information Moody’s: L/T Baa1, S/T P2, stable outlook by contacting: Investor Relations Tel: +30 210 618 3100 Email: [email protected] IR website: www.coca‑colahellenic.com/investorrelations 230 Coca-Cola HBC 2017 Integrated Annual Report GLOSSARY

Basis points (bps) Comparable adjusted EBITDA FYROM Strategic Report One hundredth of one percentage point We define adjusted EBITDA as operating Former Yugoslav Republic of Macedonia (used chiefly in expressing differences) profit before deductions for depreciation and impairment of property, plant and GDP Brand Coca-Cola products equipment (included both in cost of Gross domestic product Includes Coca-Cola, Coca-Cola Zero goods sold and in operating expenses), and Coca-Cola Light brands amortisation and impairment of and GfK adjustments to intangible assets, stock We work with the company Growth for option compensation and other BSO Knowledge (GfK) to track our customer non‑cash items, if any Business services organisation satisfaction level.

BSS Comparable net profit GRI Corporate Governance Refers to net profit after tax attributable Business solutions and systems Global Reporting Initiative, a global standard to owners of the parent for sustainability reporting CAGR Comparable operating profit (EBIT) Compound annual growth rate HoReCa Operating profit (EBIT) refers to profit Distribution channel encompassing hotels, before tax excluding finance income/ Capital expenditure or CapEx restaurants, cafes (costs) and share of results of equity Gross CapEx is defined as payments for method investments purchase of property, plant and equipment. IFRS Net CapEx is defined as payments for Customer International Financial Reporting Standards, purchase of property, plant and equipment issued by the International Accounting

Retail outlet, restaurant or other operation Financial Statements less receipts from disposals of property, Standards Board that sells or serves Coca-Cola HBC plant and equipment plus principal products directly to consumers repayment of finance lease obligations IIRC DIFOTAI The International Integrated Reporting Carbon emissions (scope 1 and 2) Council, a global coalition of regulators, Deliver in full, on time and accurately Emissions of CO and other greenhouse investors, companies, standard-setters, 2 invoiced gases from fuel combustion and energy the accounting profession and NGOs. The use in Coca-Cola HBC’s own operations in DME coalition is promoting communication bottling, storage, distribution and in offices about value creation as the next step in the Direct marketing expenses evolution of corporate reporting Carbon footprint

EDS Immediate consumption Swiss Statutory Reporting Global emissions of CO2 and other greenhouse gases from Coca-Cola HBC’s Every Dealer Survey A distribution channel where consumers wider value chain (raw materials, product buy chilled beverages in single-serve cooling etc.) Energy use ratio packages and fountain products for The KPI used by Coca-Cola HBC to immediate consumption, away from home CHP measure energy consumption in the Combined heat and power plants bottling plants, expressed in megajoules Inventory days of energy consumed per litre of produced We define inventory days as the average Coca-Cola HBC beverage (MJ/lpb) number of days an item remains in inventory before being sold, using the Coca-Cola HBC AG, and, as the context FMCG may require, its subsidiaries and joint following formula: average inventory ÷ cost ventures; also, the Group, the Company Fast-moving consumer goods of goods sold x 365 Supplementary Information

Coca-Cola System Fragmented trade Ireland The Coca-Cola Company and its Kiosks, quick service restaurants (QSR) and The Republic of Ireland and Northern bottling partners hotels, restaurants and cafes (HoReCa) Ireland

Cold drink equipment Future consumption Italy A generic term encompassing point-of- A distribution channel where consumers Territory in Italy served by Coca-Cola HBC sale equipment such as coolers buy multi-packs and larger packages from (excludes Sicily) (refrigerators), vending machines and supermarkets and discounters which are post-mix machines not consumed on the spot

Coca-Cola HBC 2017 Integrated Annual Report 231 GLOSSARY CONTINUED

Joint value creation (JVC) ROIC Unit case (u.c.) An advanced programme and process Return on invested capital Approximately 5.678 litres or 24 servings, to collaborate with customers in order a typical volume measurement unit to create shared value SAP A powerful software platform that enables UN Global Compact (UNGC) Litre of produced beverage (lpb) us to standardise key business processes The world’s largest corporate citizenship Unit of reference to show environmental and systems initiative which provides a framework for performance relative to production volume businesses to align strategies with its 10 SDG principles promoting labour rights, human Market UN Sustainable Development Goals. rights, environmental protection and When used in reference to geographic On 25 September 2015, countries adopted anti‑corruption areas, a country in which Coca-Cola HBC a set of 17 goals to end poverty, protect the does business planet and ensure prosperity for all as part Volume of a new sustainable development agenda. Amount of physical product produced NARTD Each goal has specific targets to be and sold, measured in unit cases Non-alcoholic ready-to-drink achieved by 2030. Volume share NGOs Serving Share of total unit cases sold Non-governmental organisations 237ml or 8oz of beverage, equivalent to 1/24 of a unit case Value share Nm3 Share of total revenue Shared services Normal cubic metre Centre to standardise and simplify key Waste ratio NSR finance and human resources processes The KPI used by Coca-Cola HBC to Net sales revenue measure waste generation in its bottling Small basket plants, expressed in grammes of waste OBPPC Refers to a shift in buying habits as generated per litre of produced beverage consumers increase frequency of visits (g/lpb) Occasion, Brand, Price, Package, Channel to stores but have smaller basket sizes Organised trade which can result in lower volume but Waste recycling higher revenue The KPI used by Coca-Cola HBC to Large retailers (e.g. supermarkets, measure the percentage of production discounters etc.) Sparkling beverages waste at bottling plants that is recycled PET Non-alcoholic carbonated beverages or recovered containing flavourings and sweeteners, but Polyethylene terepthalate, a form excluding, among others, waters and Water footprint of polyester used in the manufacturing flavoured waters, juices and juice drinks, A measure of the impact of water use, in of beverage bottles sports and energy drinks, teas and coffee operations or beyond, as defined by the Water Footprint Network methodology Ready-to-drink (RTD) SKU Drinks that are pre-mixed and packaged, Stock Keeping Unit Water use ratio ready to be consumed immediately with The KPI used by Coca-Cola HBC to no further preparation Still and water beverages measure water use in its bottling plants, Right Execution Daily (RED) Non-alcoholic beverages without expressed in litres of water used per litre carbonation including, but not limited to, of produced beverage (l/lpb) Major Group-wide programme to ensure waters and flavoured waters, juices and in-outlet excellence juice drinks, sports and energy drinks, Working capital teas and coffee Receivable days Operating current assets minus operating current liabilities excluding financing and The average number of days it takes to Territory investment activities collect receivables using the following The 28 countries where Coca-Cola HBC formula: average accounts receivables x net operates sales revenue x 365 UNESDA Union of European Soft Drinks Associations

232 Coca-Cola HBC 2017 Integrated Annual Report Special note regarding forward‑looking statements Strategic Report This document contains forward-looking statements that involve risks and uncertainties. These statements may generally, but not always, be identified by the use of words such as ‘believe’, ‘outlook’, ‘guidance’, ‘intend’, ‘expect’, ‘anticipate’, ‘plan’, ‘target’, ‘seek’, ‘estimates’, ’potential‘ and similar expressions to identify forward-looking statements. All statements other than statements of historical facts, including, among others, statements regarding the future financial position and results; Coca-Cola HBC’s outlook for 2018 and future years; business strategy and the effects of the global economic slowdown; the impact of the sovereign debt crisis, currency volatility, Coca-Cola HBC’s recent acquisitions, and restructuring initiatives on Coca-Cola HBC’s business and financial condition; Coca-Cola HBC’s future dealings with The Coca Cola Company; budgets; projected levels of consumption and production; projected raw material and other costs; estimates of capital expenditure; free cash flow; and effective tax rates and plans and objectives of management for future operations, are forward‑looking statements. You should not place undue reliance on such forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect Coca-Cola HBC’s current expectations and assumptions about future events and circumstances that may not prove accurate. Forward-looking statements speak only as of the date they are Corporate Governance made. Coca-Cola HBC’s actual results and events could differ materially from those anticipated in the forward‑looking statements for many reasons, including the risks described in the Risk and materiality section. Although Coca-Cola HBC believes that, as of the date of this document, the expectations reflected in the forward‑looking statements are reasonable, Coca-Cola HBC cannot assure that Coca-Cola HBC’s future results, level of activity, performance or achievements will meet these expectations. Moreover, neither Coca-Cola HBC, nor its Directors, employees, advisors nor any other person assumes responsibility for the accuracy and completeness of any forward-looking statements. After the date of this Integrated Annual Report, unless Coca-Cola HBC is required by law or the rules of the UK Financial Conduct Authority to update these forward-looking statements, Coca-Cola HBC makes no commitment to update any of these forward- looking statements to conform them either to actual results or to changes in Coca-Cola HBC’s expectations. Financial Statements Swiss Statutory Reporting Supplementary Information

Coca-Cola HBC 2017 Integrated Annual Report 233 About our report The 2017 Integrated Annual Report (the ‘Annual Report’) consolidates Coca-Cola HBC AG’s (also referred to as ‘Coca-Cola HBC' or the ‘Company’ or the ‘Group’) UK and Swiss disclosure requirements, while meeting the disclosure requirements for its secondary listing on the Athens Exchange. In addition, the Annual Report aims to deliver against the expectations of the Company’s stakeholders and sustainability reporting standards, providing a transparent overview of the Group’s performance and progress in sustainable development for 2017. Our strategy is designed to deliver responsible, sustainable and profitable growth. Our strategic objectives of driving volume growth, focusing on value, improving efficiency and investing in the business are supported by our people and our commitment to sustainability. The initiatives we implemented to achieve our objectives and the evidence of our success during the year form the basis of the narrative in the Annual Report, which is structured around our stakeholders: our people, communities, consumers, customers and other stakeholders, with whom we work to enhance efficiencies in the business. The Annual Report is for the year ended 31 December 2017, and its focus is on the primary core business of non-alcoholic ready-to-drink beverages across the 28 countries in which we operate. Our website and any other website referred to in the Annual Report are not incorporated by reference and do not form part of the Annual Report. The consolidated financial statements of the Group, included on pages 133-196, have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Coca-Cola HBC AG’s statutory financial statements, included on pages 207-217, have been prepared in accordance with the Swiss Code of Obligations. Unless otherwise indicated or required by context, all financial information contained in this document has been prepared in accordance with IFRS. For Swiss law purposes, the annual management report consists of the sections entitled ‘Strategic Report’, ‘Corporate Governance’ (without the sub-section ‘Director’s Remuneration Report’), ‘Supplementary Information’ and ‘Glossary’. The Group uses certain Alternative performance measures (‘APMs’) that provide additional insights and understanding to the Group’s underlying operating and financial performance, financial condition and cash flows. A full list of these APMs, their definition and reconciliation to the respective IFRS measures can be found on pages 223-226. This report is prepared in accordance with the Global Reporting Initiative (GRI) standards, comprehensive option. In addition, the sustainability aspects of this Annual Report comply with the AA1000AS Assurance Standard, and the advanced level requirements for communication on progress against the 10 Principles of the United Nations Global Compact. In addition, the report is aligned with the principles and elements of the International Integrated Reporting Council’s (IIRC) framework. Carbon emissions are calculated using the GHG Protocol Corporate Accounting and Reporting Standard methodology. Furthermore, Coca-Cola HBC supports the Task Force on Climate-related Financial Disclosures (TCFD). The sustainability aspects of the Integrated Annual Report have been verified by an independent professional assurance provider as dictated by the Company’s Operating and Sustainability Steering Committees, and you can find the relevant assurance statement on pages 227-229. As with the rest of the information provided, the sustainability aspects of this Annual Report are for the full year ended 31 December 2017 and the related information presented is based on an annual reporting cycle. We remain committed to strong corporate governance and leadership as well as transparency in our disclosures. We will continue to review our reporting approach and routines, to ensure they meet best practice reporting standards and the expectations of our stakeholders, and provide visibility on how we create sustainable value for the communities we serve.

234 Coca-Cola HBC 2017 Integrated Annual Report VISIT US www.coca‑colahellenic.com The Group site features all the latest news and stories from around our business and communities as well as an interactive online version of this report. Write to us We have dedicated email addresses which you can use to communicate with us: [email protected] [email protected] Coca‑Cola Hellenic Bottling Company 2017 Integrated Annual Report ). ® Turmstrasse 26, CH-6312 Steinhausen, Switzerland www.coca‑colahellenic.com [email protected] [email protected] Coca‑Cola HBC AG This report is printed utilising vegetable-based inks on Magno satin & Arco print, both of which are sourced from well-managed forests independently certified according to the rules of the Forest Stewardship Council (FSC This report was printed by an FSC and carbon-neutral printing company. Both materials are manufactured at a mill that is certified to the ISO14001 and EMAS environmental standards. Designed and produced by Black Sun Plc